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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2001
OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ____ to _______________

Commission file number 1-12378

NVR, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)



Virginia 54-1394360
- -------------------------------------------------------------- -----------------------------------
(State or other jurisdiction of incorporation or organization) (IRS employer identification number)


7601 Lewinsville Road, Suite 300
McLean, Virginia 22102
(703) 761-2000
- --------------------------------------------------------------------------------
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

____________

Securities registered pursuant to Section 12(b) of the Act:
-----------------------------------------------------------



Title of each class Name of each exchange on which registered
------------------- -----------------------------------------

Common stock, par value $0.01 per share American Stock Exchange


Securities registered pursuant to Section 12(g) of the Act: None
-----------------------------------------------------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No__
-

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

As of January 30, 2002 the aggregate market value of the voting stock held by
non-affiliates of NVR, Inc. based on the closing price reported on the American
Stock Exchange for the Common Stock of NVR, Inc. on such date was approximately
$1.6 billion. As of January 30, 2002 there were 7,564,328 total shares of common
stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement of NVR, Inc. to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A of the Securities Exchange Act of
1934 on or prior to April 30, 2002 are incorporated by reference into Part III
of this report.

Page 1 of 108 pages
The Exhibit Index begins on page 20.



INDEX



PART I Page
- ------ ----

Item 1. Business ...................................................................... 7
Item 2. Properties .................................................................... 10
Item 3. Legal Proceedings ............................................................. 10
Item 4. Submission of Matters to a Vote of Security Holders ........................... 10
Executive Officers of the Registrant .......................................... 11
PART II
- -------

Item 5. Market for Registrants' Common Equity and Related Shareholder Matters ......... 11
Item 6. Selected Financial Data ....................................................... 12
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations ......................................................... 12
Item 7A. Quantitative and Qualitative Disclosure About Market Risk ..................... 16
Item 8. Financial Statements and Supplementary Data ................................... 19
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure .......................................................... 19


PART III
- --------

Item 10. Directors and Executive Officers of the Registrant ............................ 19
Item 11. Executive Compensation ........................................................ 19
Item 12. Security Ownership of Certain Beneficial Owners and Management ................ 19
Item 13. Certain Relationships and Related Transactions ................................ 19

PART IV
- -------

Item 14. Exhibits and Reports on Form 8-K ............................................. 19


2



Forward-Looking Statements

Some of the statements in this Form 10-K, as well as statements made by
NVR in periodic press releases or other public communications, constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934. Certain, but
not necessarily all, of such forward-looking statements can be identified by the
use of forward-looking terminology, such as "believes," "expects," "may,"
"will," "should," or "anticipates" or the negative thereof or other comparable
terminology. All statements other than of historical facts are forward looking
statements. Forward looking statements contained in this document include those
regarding market trends, NVR's financial position, business strategy, projected
plans and objectives of management for future operations. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors that
may cause the actual results or performance of NVR to be materially different
from future results, performance or achievements expressed or implied by the
forward-looking statements. Such risk factors include, but are not limited to
the following: general economic and business conditions (on both a national and
regional level); interest rate changes; access to suitable financing;
competition; the availability and cost of land and other raw materials used by
NVR in its homebuilding operations; shortages of labor; weather related slow
downs; building moratoria; governmental regulation; the ability of NVR to
integrate any acquired business; fluctuation and volatility of stock and other
financial markets; and other factors over which NVR has little or no control.

RISK FACTORS

Our business can be negatively impacted by interest rate movements, inflation
and other economic factors.

Our business is affected by the risks generally incident to the
residential construction business, including:

. actual and expected direction of interest rates, which affect
our costs, the availability of construction financing, and
long-term financing for potential purchasers of homes;
. the availability of adequate land in desirable locations on
reasonable terms;
. unexpected changes in customer preferences; and
. changes in the national economy and in the local economies of
the markets in which we have concentrated operations.

High rates of inflation generally affect the homebuilding industry
adversely because of their adverse impact on interest rates. High interest rates
not only increase the cost of borrowed funds to homebuilders but also have a
significant effect on housing demand and on the affordability of permanent
mortgage financing to prospective purchasers. We are also subject to potential
volatility in the price of commodities that impact costs of materials used in
our homebuilding business. Increases in prevailing interest rates could have a
material adverse effect on our sales, profitability, stock performance and
ability to service our debt obligations.

Our financial results also are affected by the risks generally incident
to our mortgage banking business, including interest rate levels, the impact of
government regulation of mortgage loan originations and servicing and the need
to issue forward commitments to fund and sell mortgage loans. Our homebuilding
customers accounted for almost all of our mortgage banking business in 2001. Our
mortgage banking business is therefore affected by the volume of our continuing
homebuilding operations. In addition, adverse changes in governmental regulation
may have a negative impact on our mortgage loan origination business.

Our mortgage banking business also is affected by interest rate

fluctuations. We also may experience marketing losses resulting from daily
increases in interest rates to the extent we are unable to match interest rates
and amounts on loans we have committed to originate with forward commitments
from third parties to purchase such loans. We employ procedures designed to
mitigate any such potential losses, but there can be no assurance that such
procedures will be entirely successful. Increases in interest rates may have a
material

3



adverse effect on our sales, profitability, stock performance and ability to
service our debt obligations.

These factors (and thus the homebuilding business) have tended to be
cyclical in nature. Any downturn in the national economy or the local economies
of the markets in which we operate could have a material adverse effect on our
sales, profitability, stock performance and ability to service our debt
obligations. In particular, approximately 48% of our home settlements during
2001 occurred in the Washington, D.C. and Baltimore, Md. metropolitan areas,
which amounted to 59% of NVR's 2001 homebuilding revenues. Thus, NVR is
dependent to a significant extent on the economy and demand for housing in those
areas.

Our inability to secure and carry an adequate inventory of lots could adversely
impact our operations.

The results of our homebuilding operations are dependent upon our
continuing ability to control an adequate number of homebuilding lots in
desirable locations. We have not experienced significant shortages in the supply
of lots in our principal markets or difficulty in controlling lots through
option contracts in sufficient numbers and in adequate locations to fulfill our
business plan and on terms consistent with our past operations. There can be no
assurance, however, that an adequate supply of building lots will continue to be
available on terms similar to those available in the past, or that we will not
be required to devote a greater amount of capital to controlling building lots
than we have historically. Although we believe that we will have adequate
capital resources and financing to control a sufficient number of building lots
to fulfill our current business plan, there can be no assurance that our
resources and financing will in fact be sufficient to meet our expectations. An
insufficient supply of building lots in one or more of our markets or our
inability to purchase or finance building lots on reasonable terms could have a
material adverse effect on our sales, profitability, stock performance and
ability to service our debt obligations.

Inventory risk can be substantial for homebuilders. The market value of
building lots and housing inventories can fluctuate significantly as a result of
changing market conditions. In addition, inventory carrying costs can be
significant and can result in losses in a poorly performing project or market.
We must, in the ordinary course of our business, continuously seek and make
acquisitions of lots for expansion into new markets as well as for replacement
and expansion within our current markets. Although we employ various measures
designed to manage inventory risks, there can be no assurance that such measures
will be successful. In the event of significant changes in economic or market
conditions, there can be no assurance that we will not dispose of certain
subdivision inventories on a bulk or other basis which may result in a loss
which could have a material adverse effect on our sales, profitability, stock
performance and ability to service our debt obligations.

Our current indebtedness may impact our future operations and our ability to
access necessary financing.

Our homebuilding operations are dependent in part on the availability
and cost of working capital financing, and may be adversely affected by a
shortage or an increase in the cost of such financing. We believe that we will
be able to meet our needs for working capital financing from cash generated from
operations and from our existing or a replacement working capital revolving
credit facility. If we require working capital greater than that provided by our
operations and our credit facility, we may be required to seek to increase the
amount available under the facility or to obtain alternative financing. No
assurance can be given that additional or replacement financing will be
available on terms that are favorable or acceptable. If we are at any time
unsuccessful in obtaining sufficient capital to fund our planned homebuilding
expenditures, we may experience a substantial delay in the completion of any
homes then under construction. Any delay could result in cost increases and
could have a material adverse effect on our sales, profitability, stock
performance, ability to service our debt obligations and future cash flows.

Our existing indebtedness contains financial covenants with which we
are currently in compliance and any future working capital facilities may also
contain similar financial covenants. This indebtedness also contains or may
contain other restrictive covenants, including limitations on our ability,
including our subsidiaries, to incur additional indebtedness, pay dividends and
make distributions, make loans and investments, enter into transactions with
affiliates, effect certain asset sales, incur certain liens, merge or
consolidate with any other person, or transfer all or substantially all of our
properties and assets. Substantial losses by us or other action or inaction by
us or our subsidiaries could result in the violation of one or more of

4



these covenants which could result in decreased liquidity or a default on our
indebtedness, thereby having a material adverse effect on our sales,
profitability, stock performance and ability to service our debt obligations.

Our mortgage banking operations are dependent on the availability, cost
and other terms of mortgage warehouse financing, and may be adversely affected
by any shortage or increased cost of such financing. Although we believe that
our needs for mortgage warehouse financing will be met by our existing mortgage
warehouse arrangements and repurchase agreements, no assurance can be given that
any additional or replacement financing will be available on terms that are
favorable or acceptable. Our mortgage banking operations are also dependent upon
the securitization market for mortgage-backed securities, and could be
materially adversely affected by any fluctuation or downturn in such market.

Government regulations and environmental matters can negatively affect our
operations.

We are subject to various local, state and federal statutes,
ordinances, rules and regulations concerning zoning, building design,
construction and similar matters, including local regulations that impose
restrictive zoning and density requirements in order to limit the number of
homes that can eventually be built within the boundaries of a particular area.
We have from time to time been subject to, and may also be subject in the future
to, periodic delays in our homebuilding projects due to building moratoria in
the areas in which we operate. Changes in regulations that restrict homebuilding
activities in one or more of our principal markets could have a material adverse
effect on our sales, profitability, stock performance and ability to service our
debt obligations.

We are also subject to a variety of local, state and federal statutes,
ordinances, rules and regulations concerning the protection of health and the
environment. We are subject to a variety of environmental conditions that can
affect our business and our homebuilding projects. The particular environmental
laws that apply to any given homebuilding site vary greatly according to the
location and environmental condition of the site and the present and former uses
of the site and adjoining properties. Environmental laws and conditions may
result in delays, may cause us to incur substantial compliance and other costs,
and can prohibit or severely restrict homebuilding activity in certain
environmentally sensitive regions or areas, thereby adversely affecting our
sales, profitability, stock performance and ability to service our debt
obligations.

We face competition in our housing and mortgage banking operations.

The homebuilding industry is highly competitive. We compete with
numerous homebuilders of varying size, ranging from local to national in scope,
some of whom have greater financial resources than we do. We face competition:

. for suitable and desirable lots at acceptable prices;
. from selling incentives offered by competing builders
within and across developments; and
. from the home resale market.

Our homebuilding operations compete primarily on the basis of price, location,
design, quality, service and reputation. Historically we have been one of the
leading homebuilders in each of the markets where we operate.

The mortgage banking industry is also competitive, both for loan
origination at the time a property is sold, and for refinancings. Our main
competition comes from other national, regional and local mortgage bankers,
thrifts and banks in each of these markets. Our mortgage banking operations
compete primarily on the basis of customer service, variety of products offered,
interest rates offered, prices of ancillary services and relative financing
availability and costs.

There can be no assurance that we will continue to compete successfully
in our homebuilding or mortgage banking operations. An inability to effectively
compete may have an adverse impact on our sales, profitability, stock
performance and ability to service our debt obligations.

A shortage of building materials or labor may adversely impact our operations.

5



The homebuilding business has in the past, from time to time,
experienced material and labor shortages, including shortages in insulation,
drywall, certain carpentry work, concrete, as well as fluctuating lumber prices
and supply. In addition, high employment levels and strong construction market
conditions could restrict the labor force available to our subcontractors and us
in one or more of our markets. While we are not presently experiencing any
serious material or labor shortages, material increases in costs resulting from
these shortages, or delays in construction of homes, could have a material
adverse effect upon our sales, profitability, stock performance and ability to
service our debt obligations.

Weather-related and other events beyond our control may adversely impact our
operations.

Extreme weather or other events, such as hurricanes, tornadoes,
earthquakes, forest fires, floods or terrorist attacks, may affect our markets,
our operations and our profitability. These events may impact our physical
facilities or those of our suppliers or subcontractors, causing us material
increases in costs, or delays in construction of homes, which could have a
material adverse effect upon our sales, profitability, stock performance and
ability to service our debt obligations.

6



PART I
------

Item 1. Business.
- ------- ---------

General

NVR, Inc. ("NVR") was formed in 1980 as NVHomes, Inc. NVR operates in two
business segments: 1) homebuilding and 2) mortgage banking. NVR conducts its
homebuilding activities directly and its mortgage banking operations primarily
through a wholly owned subsidiary, NVR Mortgage Finance, Inc. ("NVR Finance").
Unless the context otherwise requires, references to "NVR" include NVR and its
subsidiaries.

NVR is one of the largest homebuilders in the United States and in the
Washington, D.C. and Baltimore, Maryland metropolitan areas. Approximately 48%
of the number of homes settled during 2001 occurred in the Washington, D.C. and
Baltimore, Md. metropolitan areas, which amounted to 59% of NVR's 2001
homebuilding revenues. NVR's homebuilding operations include the construction
and sale of single-family detached homes, townhomes and condominium buildings
under three tradenames: Ryan Homes, NVHomes and Fox Ridge Homes. The Ryan Homes
and Fox Ridge Homes products are moderately priced and marketed primarily to
first-time homeowners and first-time move-up buyers. The NVHomes product is
marketed primarily to move-up and upscale buyers. The Ryan Homes product is
built in eighteen metropolitan areas located in Maryland, Virginia, West
Virginia, Pennsylvania, New York, North Carolina, South Carolina, Ohio, New
Jersey, Delaware and Tennessee. The Fox Ridge Homes product is built solely in
the Nashville, Tennessee metropolitan area. The NVHomes product is built in the
Washington, D.C, Baltimore, MD, Charlotte, NC and Philadelphia, PA metropolitan
areas. In 2001, the average price of a unit settled by NVR was approximately
$246,000.

NVR is not in the land development business. NVR generally seeks to
maintain control over a supply of lots believed to be suitable to meet its sales
objectives for the next 24 to 36 months. NVR purchases finished lots under
option contracts which typically require deposits, which may be forfeited if NVR
fails to perform under the contract. The deposits are in the form of cash or
letters of credit in varying amounts and represent a percent of the aggregate
acquisition value of the finished lots. This lot acquisition strategy reduces
the financial requirements and risks associated with direct land ownership and
land development.

In addition to building and selling homes, NVR provides a number of
mortgage-related services through its regional mortgage banking operations,
which operate in 10 states. Through office locations in each of NVR's
homebuilding markets, NVR Finance originates mortgage loans almost exclusively
for NVR's homebuyers.

NVR's mortgage banking business generates revenues primarily from
origination fees, gains on sales of loans, title fees, and sales of servicing
rights. In 2001, NVR's mortgage banking business closed approximately 9,700
loans with an aggregate principal amount of approximately $1.9 billion. NVR's
mortgage banking business sells all of the mortgage loans it closes into the
secondary markets, and also sells substantially all of its originated mortgage
servicing rights on a flow basis. The mortgage segment's servicing portfolio at
December 31, 2001 was approximately $223 million in unpaid principal balance of
loans serviced.

Segment information for NVR's homebuilding and mortgage banking businesses
is included in note 2 to NVR's consolidated financial statements.

Homebuilding

Products

NVR offers single-family detached homes, townhomes, and condominium
buildings with many different basic home designs. These home designs have a
variety of elevations and numerous other

7



options. Homes built by NVR combine traditional or colonial exterior designs
with contemporary interior designs and amenities. NVR's homes range from
approximately 985 to 7,286 square feet, with two to five bedrooms, and are
priced from approximately $86,000 to $1,600,000.

Markets

The following table summarizes settlements and contracts for sales of homes
for each of the last three years by region:



Contracts for Sale
Settlements (Net of Cancellations)
Year Ended December 31, Year Ended December 31,
Region 2001 2000 1999 2001 2000 1999
- ------ ----------- ----------- ----------- ---------- ----------- -----------

Washington/Baltimore (1) 5,007 5,208 5,073 5,046 5,305 5,215
Other (2) 5,365 4,847 4,243 5,736 4,963 4,463
----------- ----------- ----------- ---------- ----------- -----------
Total 10,372 10,055 9,316 10,782 10,268 9,678
=========== =========== =========== ========== =========== ===========



(1) Includes the Washington, D.C., Baltimore, Md. metropolitan areas and West
Virginia
(2) Includes Pennsylvania, New York, North Carolina, South Carolina, Ohio, New
Jersey, Tennessee, Delaware and Richmond, Virginia.

Backlog

Backlog units and dollars were 5,558 and approximately $1.5 billion
respectively, at December 31, 2001 compared to backlog units of 5,148 and
dollars of approximately $1.3 billion at December 31, 2000. NVR anticipates that
substantially all of its backlog units, net of cancellations, as of December 31,
2001 will be settled during 2002.

Construction

Independent subcontractors under fixed-price contracts perform construction
work on NVR's homes. The subcontractors' work is performed under the supervision
of NVR employees who monitor quality control. NVR uses many independent
subcontractors in its various markets and is not dependent on any single
subcontractor or on a small number of subcontractors.

Sales and Marketing

NVR's preferred marketing method is for customers to visit a furnished
model home featuring many built-in options and a landscaped lot. The garages of
these model homes are usually converted into temporary sales centers where
alternative facades and floor plans are displayed and designs for other models
are available for review. Sales representatives are compensated predominantly on
a commission basis.

Regulation

NVR and its subcontractors must comply with various federal, state and
local zoning, building, environmental, advertising and consumer credit statutes,
rules and regulations, as well as other regulations and requirements in
connection with its construction and sales activities. All of these regulations
have increased the cost required to market NVR's products. Counties and cities
in which NVR builds homes have at times declared moratoriums on the issuance of
building permits and imposed other restrictions in the areas in which sewage
treatment facilities and other public facilities do not reach minimum standards.
To date, restrictive zoning laws and the imposition of moratoriums have not had
a material adverse effect on NVR's construction activities. However, there is no
assurance that such restrictions will not adversely affect NVR in the future.

8



Competition, Market Factors and Seasonality

The housing industry is highly competitive. NVR competes with numerous
homebuilders of varying size, ranging from local to national in scope, some of
whom have greater financial resources than NVR. NVR also faces competition from
the home resale market. NVR's homebuilding operations compete primarily on the
basis of price, location, design, quality, service and reputation. NVR
historically has been one of the market leaders in each of the markets where NVR
builds homes.

The housing industry is cyclical and is affected by consumer confidence
levels, prevailing economic conditions and interest rates. Other factors that
affect the housing industry and the demand for new homes include the
availability and increases in the cost of land, labor and materials, changes in
consumer preferences, demographic trends and the availability of mortgage
finance programs.

The results of NVR's homebuilding operations generally reflect the
seasonality of the housing market in the Middle Atlantic region of the United
States. NVR historically has entered into more sales contracts during the first
and second quarters.

NVR is dependent upon building material suppliers for a continuous flow of
raw materials. Whenever possible, NVR utilizes standard products available from
multiple sources. Such raw materials have been generally available in adequate
supply.

Mortgage Banking

NVR provides a number of mortgage related services to its homebuilding
customers through its mortgage banking operations. The mortgage banking
operations of NVR also include separate subsidiaries that broker title insurance
and perform title searches in connection with mortgage loan closings for which
they receive commissions and fees. Because NVR originates mortgage loans
predominately for NVR's homebuilding customers, NVR's mortgage banking segment
is dependent on NVR's homebuilding segment.

NVR's mortgage banking business sells all of the mortgage loans it closes
to investors in the secondary markets, rather than holding them for investment.
NVR's wholly owned subsidiary, NVR Finance, is an approved seller/servicer for
FNMA, GNMA, FHLMC, VA and FHA mortgage loans. NVR's mortgage banking operations
sell substantially all originated mortgage servicing rights on a flow basis. The
mortgage segment's servicing portfolio was approximately $223 million in unpaid
principal balance of loans serviced at the end of 2001 compared to approximately
$275 million at December 31, 2000.

Competition and Market Factors

NVR's mortgage banking operations operate through 17 offices in 10 states.
NVR's main competition comes from national, regional, and local mortgage
bankers, thrifts and banks in each of these markets. NVR's mortgage banking
operations compete primarily on the basis of customer service, variety of
products offered, interest rates offered, prices of ancillary services and
relative financing availability and costs.

Regulation

NVR Finance is an approved seller/servicer of FNMA, GNMA, FHLMC, FHA and VA
mortgage loans, and is subject to all of those agencies' rules and regulations.
These rules and regulations restrict certain activities of NVR Finance. NVR
Finance is currently eligible and expects to remain eligible to participate in
such programs. However, any significant impairment of its eligibility could have
a material adverse impact on its operations. In addition, NVR Finance is subject
to regulation at the state and federal level with respect to specific
origination, selling and servicing practices.

9



Pipeline

NVR's mortgage loans in process which had not closed (the "Pipeline") at
December 31, 2001 had an aggregate principal balance of $1.1 billion. NVR
anticipates that substantially all of its Pipeline, net of cancellations, will
close with customers during 2002.

Employees

At December 31, 2001, NVR employed 3,334 full-time persons, of whom 1,237
were officers and management personnel, 187 were technical and construction
personnel, 602 were sales personnel, 463 were administrative personnel and 845
were engaged in various other service and labor activities. None of NVR's
employees are subject to a collective bargaining agreement and NVR has never
experienced a work stoppage. Management believes that its employee relations are
good.

Item 2. Properties.
- ------- -----------

NVR's executive offices are located in McLean, Virginia, where NVR
currently leases office space for a nine and one-half year term expiring in
March 2005.

NVR's manufacturing facilities are currently located in Thurmont, Maryland;
Farmington, New York; Clover, South Carolina; Darlington, Pennsylvania; and
Portland, Tennessee. NVR has leased the Thurmont and Farmington manufacturing
facilities for a term expiring in 2014 with various options for extension of the
leases and for the purchase of the facilities. The Clover, Darlington and
Portland leases expire in 2002, 2005 and 2004, respectively, and also contain
various options for extensions of the leases and for the purchase of the
facilities. NVR is in the process of constructing a manufacturing facility in
North Carolina, which is expected to be completed during the first quarter of
2002. The North Carolina facility will replace the manufacturing plant in
Clover, South Carolina.

NVR also leases office space in 84 locations in 10 states for field
offices, mortgage banking and title services branches under leases expiring at
various times through 2009. NVR anticipates that, upon expiration of existing
leases, it will be able to renew them or obtain comparable facilities on
acceptable terms.

Item 3. Legal Proceedings.
- ------- ------------------

NVR is not involved in any legal proceedings that are likely to have a
material adverse effect on its financial condition or results of operations.

Item 4. Submission of Matters to a Vote of Security Holders.
- ------- ----------------------------------------------------

No matters had been submitted to a vote of security holders during the
quarter ended December 31, 2001.

10



Executive Officers of the Registrant



Name Age Positions
---- --- ---------

Dwight C. Schar 60 Chairman of the Board, President and Chief Executive Officer of NVR
William J. Inman 54 President of NVR Mortgage Finance, Inc.
Paul C. Saville 46 Executive Vice President Finance, Chief Financial Officer and Treasurer
of NVR
Dennis M. Seremet 46 Vice President and Controller of NVR



Dwight C. Schar has been chairman of the board, president and chief
executive officer of NVR since September 30, 1993.

William J. Inman has been president of NVR Mortgage Finance, Inc.
since January 1992.

Paul C. Saville had been senior vice president finance, chief financial
officer and treasurer of NVR since September 30, 1993. Effective
January 1, 2002, Mr. Saville was named an executive vice president.

Dennis M. Seremet has been vice president and controller of NVR since
April 1, 1995.

PART II
-------

Item 5. Market for Registrant's Common Equity and Related Shareholder Matters.
- ------- ----------------------------------------------------------------------

NVR's shares of common stock are listed and principally traded on the
American Stock Exchange ("AMEX"). The following table sets forth for the periods
indicated the high and low closing sales prices per share for the years 2001 and
2000 as reported by the AMEX.



HIGH LOW
--------- --------

Prices per Share:

2000:
First Quarter ...... 54.56 42.50
Second Quarter ..... 63.25 52.75
Third Quarter ...... 81.00 57.38
Fourth Quarter ..... 124.60 76.00

2001:
First Quarter ...... 170.00 109.40
Second Quarter ..... 203.00 140.90
Third Quarter ...... 177.00 131.00
Fourth Quarter ..... 205.75 141.75


As of the close of business on January 30, 2002, there were 709
shareholders of record.

NVR did not pay any cash dividends on its shares of common stock during
the years 2001 or 2000. NVR's bank indebtedness and the indenture governing
NVR's 8% Senior Notes due 2005 (the "Senior Notes") contain restrictions on the
ability of NVR to pay dividends on its common stock. See note 6 to the financial
statements for a detailed description of the restrictions included in the
indenture governing the Senior Notes.

11



Item 6. Selected Financial Data (dollars in thousands, except per share amounts)
- ------- -----------------------

The following tables set forth selected consolidated financial information
for NVR. The selected income statement and balance sheet data have been
extracted from NVR's consolidated financial statements for each of the periods
presented. The selected financial data should be read in conjunction with, and
is qualified in its entirety by, the consolidated financial statements and
related notes included elsewhere in this report.



Year Ended December 31,
------------------------------------------------------------------
2001 2000 1999 1998 1997
---- ---- ---- ---- ----

Consolidated Income Statement Data:

Homebuilding data:

Revenues $2,559,744 $2,267,810 $1,942,660 $1,504,744 $1,154,022
Gross profit 557,454 433,751 331,933 230,929 158,167
Mortgage Banking data:

Mortgage banking fees 52,591 37,944 48,165 42,640 24,473

Interest income 7,025 6,541 13,556 9,861 6,415
Interest expense 1,728 3,016 7,504 6,120 3,544
Consolidated data:

Income before extraordinary

loss $ 236,794 $ 158,246 $ 108,881 $ 66,107 $ 28,879
Income before extraordinary
loss per diluted share (1) $ 24.86 $ 14.98 $ 9.01 $ 4.97 $ 2.18




December 31,
------------------------------------------------------------------
2001 2000 1999 1998 1997
---- ---- ---- ---- ----

Consolidated Balance Sheet Data:

Homebuilding inventory $ 402,375 $ 334,681 $ 323,455 $ 288,638 $ 224,041
Total assets 995,047 841,260 767,281 724,359 564,621
Notes and loans payable 238,970 173,655 278,133 320,337 248,138
Shareholders' equity 349,118 247,480 200,640 165,719 144,640
Cash dividends per share -- -- -- -- --


(1) For the years ended December 31, 2001, 2000, 1999, 1998 and 1997, income
before extraordinary loss per diluted share was computed based on 9,525,960,
10,564,215, 12,088,388, 13,300,064 and 13,244,677 shares, respectively, which
represents the weighted average number of shares and share equivalents
outstanding for each year.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
- ------- -----------------------------------------------------------------------
of Operations
-------------
(dollars in thousands except per share data)
--------------------------------------------

Results of Operations for the Years Ended December 31, 2001, 2000 and 1999

NVR, Inc. ("NVR") operates in two business segments: (1) homebuilding and
(2) mortgage banking. Corporate general and administrative expenses are fully
allocated to the homebuilding and mortgage banking segments in the information
presented below.

Homebuilding Segment

Homebuilding revenues for 2001 increased 13% to $2,559,744 compared to
revenues of $2,267,810 in 2000. The increase in revenues was primarily due to a
10% increase in the average settlement price to $246.0 in 2001 from $224.6 in
2000 and a 3% increase in the number of homes settled to 10,372 in 2001 from
10,055 in 2000. The increase in the average settlement price is attributable to
price increases in certain of NVR's markets and to a larger number of
settlements of single family detached homes, which, in comparison, are generally
higher priced than NVR's single family attached homes. The increase in
settlements is a result of the higher backlog at the beginning of the 2001
period as compared to the beginning of the same 2000 period, as well as, to an
increase in new orders. New orders for 2001 increased by 5% to 10,782 units
compared with 10,268 units for 2000. The increase in new orders was

12



predominantly the result of increased sales in markets outside the
Baltimore/Washington, D.C. area.

Homebuilding revenues for 2000 increased 17% to $2,267,810 compared to
revenues of $1,942,660 in 1999. The increase in revenues was primarily due to an
8% increase in the number of homes settled to 10,055 in 2000 from 9,316 in 1999,
and to an 8% increase in the average settlement price to $224.6 in 2000 from
$207.7 in 1999. The increase in settlements is a direct result of the
substantially higher backlog at the beginning of the 2000 period as compared to
the beginning of the same 1999 period. The increase in the average settlement
price is attributable to price increases in certain of NVR's markets and to a
larger number of settlements of higher priced single family detached homes. New
orders for 2000 increased by 6% to 10,268 units compared with 9,678 units for
1999. The increase in new orders was predominantly the result of increased sales
in markets outside the Baltimore/Washington, D.C. area.

Gross profit margins for 2001 increased to 22% compared to 19% for 2000.
The increase in gross profit margins was due to continuing favorable market
conditions, which provided NVR the opportunity to increase selling prices in
certain of its markets, a decrease in the cost of lumber and certain other
material costs and to NVR's ongoing focus of controlling construction costs.
Gross profit margins for 2000 increased to 19% compared to 17% for 1999. The
increase in gross profit margins was due to favorable market conditions that
existed in the first half of 2000, which provided NVR the opportunity to
increase selling prices in certain of its markets during that time, a decrease
in the cost of lumber and certain other material costs, and to NVR's continued
emphasis on controlling construction costs.

Selling, general and administrative expenses ("SG&A") for 2001 increased
$24,867 as compared to 2000, and as a percentage of revenues increased to 7.0%
from 6.8%. The increase in SG&A dollars is primarily attributable to the
aforementioned increase in revenues and to an increase in personnel to support
the companies continued growth. SG&A expenses for 2000 increased $12,446 as
compared to 1999, but as a percentage of revenues decreased to 6.8% from 7.0% in
1999. The increase in SG&A dollars is primarily attributable to the
aforementioned increase in revenues.

Backlog units and dollars were 5,558 and $1,511,503, respectively, at
December 31, 2001 compared to backlog units of 5,148 and dollars of $1,318,277
at December 31, 2000. The increase in backlog dollars was primarily due to an 8%
increase in the average selling price for the six month period ending December
31, 2001 as compared to the same period for 2000. Backlog units increased
primarily due to a slower backlog turn during 2001. Backlog units and dollars
were 5,148 and $1,318,277, respectively, at December 31, 2000 compared to
backlog units of 4,935 and dollars of $1,137,332 at December 31, 1999. The
increase in backlog dollars and units was primarily due to a 9% increase in new
orders for the six-month period ended December 31, 2000 compared to the same
1999 period. The dollar increase is also due to an 8% increase in the average
selling price comparing the same six-month period.

Mortgage Banking Segment

The mortgage banking segment had operating income, excluding the
amortization of excess reorganization value and goodwill, of $31,966, $3,853 and
$14,752 for the years ended December 31, 2001, 2000 and 1999, respectively.
Total loan closings were $1,885,395, $1,749,720 and $2,911,865 for the same
respective years.

The improvement in operating income over both comparative periods was
primarily due to NVR's operational restructuring of the mortgage segment
announced in the first quarter of 2000, and to a lesser extent, to a more
favorable pricing environment. The operational restructuring specifically
entailed the closure of all of the mortgage segment's retail operations to focus
solely on serving NVR's homebuilding operations ("builder business"). The
mortgage segment's builder business historically has produced higher operating
margins than its other lines of mortgage business. The restructuring has
resulted in the mortgage segment capturing an increased percentage of the loans
and title work associated with the growing homebuilding segment's customer base.
As noted above, the homebuilding segment's settlements increased to 10,372 in
2001 from 10,055 in 2000 and 9,316 in 1999. Also, as part of its restructuring,
the mortgage segment substantially reduced staffing and related general and
administrative costs.

13



As a result of the 2000 restructuring activities described above, NVR
recorded a restructuring and asset impairment charge of $5,726 in the first
quarter of 2000. The restructuring plan was substantially completed during the
second quarter of 2000. A detail of the costs comprising the total charge
incurred in the first quarter of 2000 is as follows:

Write off of First Republic goodwill $2,575
Noncancelable office and equipment leases 1,480
Asset impairments 1,362
Severance 309
------
Total $5,726
======


During 2001 and 2000, approximately $797 and $863, respectively, in
severance and lease costs were applied against the restructuring reserve.
Approximately $129 of the restructuring accrual established at March 31, 2000,
remains at December 31, 2001, and primarily relates to accrued lease costs.

Seasonality

The results of NVR's homebuilding operations generally reflect the
seasonality of the housing market in the Middle Atlantic region of the United
States. NVR historically has entered into more sales contracts in this region
during the first and second quarters. Because NVR's mortgage banking operations
have changed their strategic focus to exclusively serve NVR's homebuilding
customers, to the extent that homebuilding is affected by seasonality, mortgage
banking operations will also be affected.

Effective Tax Rate

NVR's consolidated effective tax rates were 40.0%, 40.7% and 41.2% in 2001,
2000 and 1999, respectively. The reduction of the effective tax rate over the
three-year period is primarily due to higher taxable income relative to NVR's
permanent differences, primarily the amortization of reorganization value in
excess of amounts allocable to identifiable assets and non-deductible
compensation. In January 2002, NVR amended one of its long-term cash incentive
plans, requiring executive officers to defer receipt of payments due under the
plan until separation of service with NVR. The effect of this amendment,
estimated to produce approximately an $8,000 deferred tax benefit for
compensation expensed prior to December 31, 2001, will reduce NVR's 2002
effective tax rate below current levels as a result of converting these
compensation-related permanent tax differences to temporary differences as of
the amendment date.

Recent Accounting Pronouncements

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards ("SFAS") No. 141, "Business Combinations" and SFAS No. 142,
"Goodwill and Other Intangible Assets." SFAS No. 141 requires that the purchase
method of accounting be used for all business combinations initiated after June
30, 2001. SFAS No. 142 changes the accounting for goodwill and reorganization
value in excess of amounts allocable to identifiable assets ("excess
reorganization value") from an amortization approach to an impairment-only
approach. Management will be performing the impairment test as defined in SFAS
No. 142 during the first quarter of 2002, but does not expect that NVR will
incur an impairment loss relative to its existing excess reorganization value
and goodwill upon adoption of SFAS No. 142 on January 1, 2002. Further, NVR will
cease amortizing goodwill and excess reorganization value effective January 1,
2002.

14



Liquidity and Capital Resources

Lines of Credit and Notes Payable

NVR's homebuilding segment generally provides for its working capital cash
requirements using cash generated from operations and a short-term unsecured
working capital revolving credit facility ("Facility"). The Facility expires on
May 31, 2004, and bears interest at the election of NVR at i) the base rate of
interest announced by the Facility agent, or ii) 1.35% above the Eurodollar
rate. The weighted average interest rate for amounts outstanding under the
Facility during 2001 was 4.2%. The Facility provides for borrowings of up to
$85,000, subject to certain borrowing base limitations. Up to approximately
$40,000 of the Facility is currently available for issuance in the form of
letters of credit of which $17,798 was outstanding at December 31, 2001. There
were no direct borrowings outstanding under the Facility as of December 31,
2001. At December 31, 2001, there were no borrowing base limitations reducing
the amount available to NVR for borrowings.

NVR's mortgage banking segment provides for its mortgage origination and
other operating activities using cash generated from operations as well as
various short-term credit facilities. NVR Finance has available an annually
renewable mortgage warehouse facility (the "Mortgage Warehouse Revolving Credit
Agreement") with an aggregate borrowing limit of $125,000 to fund its mortgage
origination activities, under which $115,057 was outstanding at December 31,
2001. The Mortgage Warehouse Revolving Credit Agreement expires August 30, 2002.
The interest rate under the Mortgage Warehouse Revolving Credit Agreement is
either: (i) the London Interbank Offering Rate ("Libor") plus 1.25%, or (ii)
1.25% to the extent that NVR Finance provides compensating balances. The
weighted average interest rate for amounts outstanding under the Mortgage
Warehouse Revolving Credit Agreement was 2.3% during 2001. NVR Finance from time
to time enters into various gestation and repurchase agreements. NVR Finance
currently has available an aggregate of $75,000 of borrowing capacity in such
uncommitted facilities. Amounts outstanding thereunder accrue interest at
various rates tied to the Libor rate and are collateralized by gestation
mortgage-backed securities and whole loans. The weighted average interest rate
for amounts outstanding under these uncommitted facilities was 4.3% during 2001.
There was an aggregate of $3,464 outstanding under such gestation and repurchase
agreements at December 31, 2001. NVR Finance's mortgage warehouse facility
limits the ability of NVR Finance to transfer funds to NVR in the form of
dividends, loans or advances. NVR Finance had net assets of $10,000 as of
December 31, 2001, that were so restricted.

On January 20, 1998, NVR filed a shelf registration statement with the
Securities and Exchange Commission for the issuance of up to $400,000 of NVR's
debt securities. The shelf registration statement was declared effective on
February 27, 1998 and provides that securities may be offered from time to time
in one or more series, and in the form of senior or subordinated debt. As of
December 31, 2001, an aggregate principal balance of $255,000 was available for
issuance under the shelf registration statement.

On April 14, 1998, NVR completed an offering under the shelf registration
statement for $145,000 of senior notes due 2005 (the "Notes"), resulting in
aggregate net proceeds to NVR of approximately $142,800 after fees and expenses.
The Notes mature on June 1, 2005 and bear interest at 8%, payable semi-annually
on June 1 and December 1 of each year, commencing June 1, 1998. The Notes are
senior unsecured obligations of NVR, ranking equally in right of payment with
NVR's other existing and future unsecured indebtedness.

During 2000, NVR purchased, in the open market, an aggregate of $30,000 in
principal amount of the Senior Notes. The Notes were purchased at par, with no
material gain or loss resulting from the transaction. There is an aggregate of
$115,000 of Notes outstanding at December 31, 2001.

On February 27, 2001, NVR successfully completed a solicitation of consents
from holders of its Notes to amend the Indenture governing the Notes. The
amendment to the Indenture provides for NVR to repurchase up to an aggregate
$85,000 of its Capital Stock in one or more open market and/or privately
negotiated transactions through March 31, 2002. As of December 31, 2001, NVR had
fully utilized the $85,000 for its

15



intended purpose. In March 2001, NVR paid to each holder of the Notes who
provided consent, an amount equal to 4.5% of the principal amount of such
holder's Notes. NVR expects that it will, from time to time, repurchase
additional shares of its common stock, pursuant to repurchase authorizations by
the Board of Directors and subject to the restrictions contained within NVR's
debt agreements. NVR currently contemplates that it may seek to further amend
the Indenture governing the Notes to reduce restrictions on NVR's ability to
repurchase shares of its Common Stock. In January 2002, the Board of Directors
approved the repurchase of up to an aggregate of $300,000 of NVR's Capital Stock
in one or more open market and/or privately negotiated transactions.

Cash Flows

As shown in NVR's consolidated statement of cash flows for the year ended
December 31, 2001, NVR's operating activities provided cash of $150,317 for this
period. The cash was provided primarily by homebuilding operations and used for
increasing homebuilding inventory and making deposits to developers to acquire
control of finished lots under lot option contracts.

Net cash provided by investing activities was $15,876 for the year ended
December 31, 2001. The primary source of cash was the proceeds from the sale of
mortgage servicing rights.

Net cash used for financing activities was $165,290 for the year ended
December 31, 2001. On October 3, 2000, NVR entered into a forward purchase
contract with an unaffiliated shareholder under which NVR agreed to purchase
approximately 780,000 shares of Common Stock for an aggregate purchase price of
approximately $65,000. On January 2, 2001, NVR settled the transaction with the
shareholder by taking physical delivery of the shares for the agreed upon
purchase price paid in cash. Of the approximately 780,000 shares settled,
approximately 86,000 shares were used for NVR's employer contribution to the
Employee Stock Ownership Plan for plan year 2000 and approximately 30,000 shares
were used to fund the Deferred Compensation Plan. The remaining shares were
retained in treasury. Including the settlement of the forward purchase contract,
NVR purchased approximately 1,750,000 shares of its Common Stock in 2001 for an
aggregate purchase price of $223,839. Included in net cash used for financing is
approximately $65,000 in borrowings under credit lines to finance mortgage loan
inventory by NVR's mortgage banking segment.

At December 31, 2001, the homebuilding and mortgage banking segments had
restricted cash of $2,692 and $2,510, respectively, which includes certain
customer deposits, mortgagor tax, insurance, completion escrows and other
amounts collected at closing which relates to mortgage loans held for sale and
to home sales.

NVR believes that internally generated cash and borrowings available under
credit facilities will be sufficient to satisfy near and longer term cash
requirements for working capital and debt service in both its homebuilding and
mortgage banking operations.

Item 7A. Quantitative and Qualitative Disclosure About Market Risk.
- -------- ----------------------------------------------------------

Market risk is the risk of loss arising from adverse changes in market
prices and interest rates. NVR's market risk arises from interest rate risk
inherent in its financial instruments. Interest rate risk is the possibility
that changes in interest rates will cause unfavorable changes in net income or
in the value of interest rate-sensitive assets, liabilities and commitments.
Lower interest rates tend to increase demand for mortgage loans for home
purchasers, while higher interest rates make it more difficult for potential
borrowers to purchase residential properties and to qualify for mortgage loans.
NVR has no market rate sensitive instruments held for speculative or trading
purposes.

NVR's mortgage banking segment is exposed to interest rate risk as it
relates to its lending activities. The mortgage banking segment originates
mortgage loans, which are generally sold through optional and mandatory forward
delivery contracts into the secondary markets. All of the mortgage banking
segment's loan portfolio is held for sale and subject to forward sale
commitments. NVR also sells

16



predominantly all of its mortgage servicing rights in bulk sales at
predetermined prices which significantly reduces the market risk associated with
these interest sensitive assets.

NVR's homebuilding segment generates operating liquidity and acquires
capital assets through fixed-rate and variable-rate debt. The homebuilding
segment's primary variable-rate debt is a working capital revolving credit
facility that currently provides for unsecured borrowings up to $85,000, subject
to certain borrowing base limitations. The working capital credit facility
expires May 31, 2004 and outstanding amounts bear interest at the election of
NVR, at (i) the base rate of interest announced by the working capital credit
facility agent or (ii) 1.35% above the Eurodollar Rate. The weighted average
interest rate for the amounts outstanding under the Facility was 4.2% for 2001.
There were no amounts outstanding under the working capital revolving credit
facility at December 31, 2001.

The following table represents the contractual balances of NVR's on-balance
sheet financial instruments in dollars at the expected maturity dates, as well
as the fair values of those on balance sheet financial instruments, at December
31, 2001. The expected maturity categories take into consideration historical
and anticipated prepayment speeds, as well as actual amortization of principal
and does not take into consideration the reinvestment of cash or the refinancing
of existing indebtedness. Because NVR sells all of the mortgage loans it
originates into the secondary markets, NVR has made the assumption that the
portfolio of mortgage loans held for sale will mature in the first year.
Consequently, outstanding warehouse borrowings and repurchase facilities are
also assumed to mature in the first year.

17





Maturities (000's)
------------------

Fair
2002 2003 2004 2005 2006 Thereafter Total Value
---- ---- ---- ---- ---- ---------- ----- -----

Mortgage banking segment
- ------------------------
Interest rate sensitive assets:
Mortgage loans held for sale 142,059 - - - - - 142,059 142,736
Average interest rate 7.3% - - - - - 7.3%

Interest rate sensitive liabilities:
Variable rate warehouse line of credit 115,057 - - - - - 115,057 115,057
Average interest rate (a) 2.3% - - - - - 2.3%
Variable rate repurchase agreements 3,464 - - - - - 3,464 3,464
Average interest rate 2.3% - - - - - 2.3%
Fixed rate capital lease obligations 106 84 - - - - 190 190
Average interest rate 6.4% 6.4% - - - - 6.4%

Other
Forward trades of mortgage-backed securities 419 - - - - - 419 419
Forward loan commitments (470) - - - - - (470) (470)

Homebuilding segment
- --------------------
Interest rate sensitive assets:
Interest-bearing deposits 101,415 - - - - - 101,415 101,415
Average interest rate 1.4% - - - - - 1.4%

Interest rate sensitive liabilities:
Variable rate working capital line of credit - - - - - - - -
Average interest rate - - - - - - -
Fixed rate obligations (b) 379 387 421 115,378 235 3,459 120,259 121,265
Average interest rate 8.1% 8.1% 8.1% 8.3% 12.1% 12.2% 8.3%


(a) Average interest rate is net of credits received for compensating cash
balances.
(b) The $115,378 maturing during 2005 includes $115,000 of NVR's 8% Senior
Notes due June 2005.

18



Item 8. Financial Statements and Supplementary Data.
- ------ -------------------------------------------

The financial statements listed in Item 14 are filed as part of this
report and are incorporated herein by reference.

Item 9. Changes in and Disagreements with Accountants on Accounting and
- ------- ---------------------------------------------------------------
Financial Disclosure.
--------------------

Not applicable.

PART III
--------

Item 10. Directors and Executive Officers of the Registrant.
- ------- --------------------------------------------------

Item 10 is hereby incorporated by reference to NVR's Proxy Statement
expected to be filed with the Securities and Exchange Commission on or prior to
April 30, 2002. Reference is also made regarding the executive officers of the
registrant to "Executive Officers of the Registrant" following Item 4 of Part I
of this report.

Item 11. Executive Compensation.
- ------- ----------------------

Item 11 is hereby incorporated by reference to NVR's Proxy Statement
expected to be filed with the Securities and Exchange Commission on or prior to
April 30, 2002.

Item 12. Security Ownership of Certain Beneficial Owners and Management.
- ------- --------------------------------------------------------------

Item 12 is hereby incorporated by reference to NVR's Proxy Statement
expected to be filed with the Securities and Exchange Commission on or prior to
April 30, 2002.

Item 13. Certain Relationships and Related Transactions.
- ------- ----------------------------------------------

Item 13 is hereby incorporated by reference to NVR's Proxy Statement
expected to be filed with the Securities and Exchange Commission on or prior to
April 30, 2002.

PART IV
-------

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
- ------- ---------------------------------------------------------------

A. The following documents are filed as part of this report:

1. Financial Statements
NVR, Inc. - Consolidated Financial Statements
Report of Independent Auditors
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements

19



Exhibit
Number Description
------ ------------------------
2. Exhibits

2.1 Debtors' Second Amended Joint Plan of Reorganization under
Chapter 11 of the Bankruptcy Code (as modified to July 21,
1993). Filed as Exhibit 2.1 to NVR, Inc.'s Registration
Statement on Form S-1 (No. 33-63190) (the "1993
Registration Statement") and incorporated herein by
reference.

3.1 Restated Articles of Incorporation of NVR, Inc. ("NVR").
Filed as Exhibit 3.7 to the 1993 Registration Statement and
incorporated herein by reference.

3.2 Bylaws of NVR. Filed as Exhibit 3.8 to the 1993
Registration Statement and incorporated herein by
reference.

4.1 Form of Trust Indenture between NVR, as issuer and the Bank
of New York as trustee. Filed as Exhibit 4.3 to NVR's
Current Report on Form 8-K filed April 23, 1998 and
incorporated herein by reference.

4.2 Form of Note (included in Indenture filed as Exhibit 4.1).

4.3 Form of Supplemental Trust Indenture between NVR, as
issuer, NVR Homes, Inc., as guarantor, and The Bank of New
York, as trustee. Filed as Exhibit 4.3 to NVR's Current
Report on Form 8-K filed April 23, 1998 and incorporated
herein by reference.

4.4 Second Supplemental Indenture between NVR and the Bank of
New York, as trustee dated February 27, 2001. Filed as
Exhibit 4.5 to NVR's Annual Report on Form 10-K for the
year ended December 31, 2000 and incorporated herein by
reference.

10.1 Employment Agreement between NVR and Dwight C. Schar dated
January 1, 2002. Filed herewith.

10.2 Employment Agreement between NVR and Paul C. Saville dated
January 1, 2002. Filed herewith.

10.3 Employment Agreement between NVR and William J. Inman dated
January 1, 2002. Filed herewith.

10.6 Loan Agreement dated as of September 7, 1999 among NVR
Mortgage Finance, Inc. ("NVR Finance") and US Bank National
Association, as Agent, and the other lenders party thereto.
Filed as Exhibit 10.6 to NVR's Annual Report on Form 10-K
for the year ended December 31, 1999 and incorporated
herein by reference.

10.7 NVR, Inc. Equity Purchase Plan. Filed as Exhibit 10.10 to
the 1993 Registration Statement and incorporated herein by
reference.

10.8 NVR, Inc. Directors Long-Term Incentive Plan. Filed as
Exhibit 10.11 to NVR's 1993 Registration Statement and
incorporated herein by reference.

10.9 NVR, Inc. Management Equity Incentive Plan. Filed as
Exhibit 10.2 to NVR's 1993 Registration Statement and
incorporated herein by reference.

10.10 Employee Stock Ownership Plan of NVR, Inc. Incorporated by
reference to NVR's Annual Report on Form 10-K/A for the year
ended December 31, 1994.

10.11 NVR, Inc. 1994 Management Equity Incentive Plan. Filed as
Exhibit to NVR's Annual Report filed on Form 10-K for the
year ended December 31, 1994 and incorporated herein by
reference.

10.12 NVR, Inc. 1998 Management Long-Term Stock Option Plan.
Filed as Exhibit 4 to NVR's Registration Statement on Form
S-8 filed June 4, 1999 and incorporated herein by reference.


20



10.13 NVR, Inc. 1998 Directors' Long-Term Stock Option Plan.
Filed as Exhibit 4 to NVR's Registration Statement on Form
S-8 filed June 4, 1999 and incorporated herein by
reference.

10.14 NVR, Inc. Management Long-Term Stock Option Plan. Filed as
Exhibit 99.3 to NVR's Registration Statement on Form S-8
Registration Statement (No. 333-04975) filed May 31, 1996
and incorporated herein by reference.

10.15 NVR, Inc. Directors' Long-Term Stock Option Plan. Filed as
Exhibit 99.3 to NVR's Registration Statement on Form S-8
Registration Statement (No. 333-04989) filed May 31, 1996
and incorporated herein by reference.

10.16 NVR, Inc. 2000 Broadly-Based Stock Option Plan. Filed as
Exhibit 99.1 to NVR's Registration Statement on Form S-8
Registration Statement (No. 333-56732) filed March 8, 2001
and incorporated herein by reference.

10.17 Third Amended and Restated Credit Agreement dated as of
September 30, 1998 among NVR, as borrower, and Certain
Banks and BankBoston, as Agent for itself and Certain
Banks. Filed as Exhibit 10.29 to NVR's Annual Report on
Form 10-K for the year ended December 31, 1998 and
incorporated herein by reference.

10.18 NVR, Inc. High Performance Compensation Plan dated as of
January 1, 1996. Filed as Exhibit 10.30 to NVR's Annual
Report on Form 10-K for the year ended December 31, 1996
and incorporated herein by reference.

10.19 NVR, Inc. High Performance Compensation Plan No. 2 dated as
of January 1, 1999. Filed as Exhibit 10.31 to NVR's Annual
Report filed on Form 10-K for the year ended December 31,
1998 and incorporated herein by reference.

10.20 Mortgage Loan Purchase and Sale Agreement between Greenwich
Capital Financial Products, Inc. and NVR Finance, dated as
of July 22, 1998. Filed as Exhibit 10.34 to NVR's Annual
Report filed on Form 10-K for the year ended December 31,
1998 and incorporated herein by reference.

10.21 Second Amendment to Loan Agreement and Second Amendment to
Pledge and Security Agreement dated September 1, 2000
between NVR Finance and U.S. Bank National Association, as
agent, and other Lenders party thereto. Filed as Exhibit
10.36 to NVR's Annual Report on Form 10-K for the year
ended December 31, 2000 and incorporated herein by
reference.

10.22 Agreement to increase commitments under the NVR Mortgage
Finance Warehouse Facility by and among NVR Finance,
Comerica Bank, National City Bank of Kentucky, and U.S.
Bank National Association. Filed herewith.

10.23 Amendment No. 5 to Third Amended and Restated Credit
Agreement dated as of September 30, 1998 by and among NVR,
Inc., as borrower, Fleet National Bank, successor by merger
to BankBoston, N.A. and Certain Banks. Filed herewith.

11 Computation of Earnings per Share. Filed herewith.

21 NVR, Inc. Subsidiaries. Filed herewith.

23 Consent of KPMG LLP (independent auditors). Filed herewith.



3. Reports on Form 8-K

NVR did not file any reports on Form 8-K during the quarter
ended December 31, 2001.

21



SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

NVR, Inc.


By: /s/ Dwight C. Schar
-----------------------------------------
Dwight C. Schar
Chairman of the Board of Directors,
President and Chief Executive Officer

Dated: February 8, 2002

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.



Signature Title Date
--------- ------ ----

Chairman of the Board
of Directors, President and
/s/ Dwight C. Schar Chief Executive Officer
- ---------------------------------
Dwight C. Schar (Principal Executive Officer) February 8, 2002

/s/ C. Scott Bartlett, Jr. Director
- ---------------------------------
C. Scott Bartlett, Jr. February 8, 2002

/s/ Manuel H Johnson Director
- ---------------------------------
Manuel H. Johnson February 8, 2002

/s/ William A. Moran Director
- ---------------------------------
William A. Moran February 8, 2002

/s/ David A. Preiser Director
- ---------------------------------
David A. Preiser February 8, 2002

/s/ George E. Slye Director
- ---------------------------------
George E. Slye February 8, 2002

/s/ John M. Toups Director
- ---------------------------------
John M. Toups February 8, 2002

Executive Vice President,
Chief Financial Officer and
/s/ Paul C. Saville Treasurer
- ---------------------------------
Paul C. Saville February 8, 2002


22



Independent Auditors' Report
----------------------------

The Board of Directors and Shareholders
NVR, Inc.:

We have audited the accompanying consolidated balance sheets of NVR, Inc. and
subsidiaries as of December 31, 2001 and 2000 and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the years
in the three-year period ended December 31, 2001. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of NVR, Inc. and
subsidiaries as of December 31, 2001 and 2000 and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2001, in conformity with accounting principles generally
accepted in the United States of America.



KPMG LLP

McLean, Virginia
January 24, 2002

23



NVR, Inc.
Consolidated Balance Sheets
(dollars in thousands, except share data)



December 31,
-----------------------------------
2001 2000
------------ -----------

ASSETS

Homebuilding:
Cash and cash equivalents $ 134,181 $ 130,079
Receivables 5,745 6,670
Inventory:
Lots and housing units, covered under
sales agreements with customers 356,275 294,094
Unsold lots and housing units 37,265 32,600
Manufacturing materials and other 8,835 7,987
------------ -----------
402,375 334,681

Property, plant and equipment, net 15,397 13,514
Reorganization value in excess of amounts
allocable to identifiable assets, net 41,580 47,741
Goodwill, net 6,379 7,472
Contract land deposits 155,652 96,119
Deferred tax assets, net 51,283 43,844
Other assets 25,273 17,366
------------ -----------

837,865 697,486
------------ -----------

Mortgage Banking:
Cash and cash equivalents 4,430 7,629
Mortgage loans held for sale, net 142,059 120,999
Mortgage servicing rights, net 1,328 1,479
Property and equipment, net 781 2,351
Reorganization value in excess of amounts
allocable to identifiable assets, net 7,347 8,435
Other assets 1,237 2,881
------------ -----------

157,182 143,774
------------ -----------

Total assets $ 995,047 $ 841,260
============ ===========





(Continued)



See notes to consolidated financial statements.

24



NVR, Inc.
Consolidated Balance Sheets (Continued)
(dollars in thousands, except share data)



December 31,
-----------------------------------
2001 2000
------------ -----------

LIABILITIES AND SHAREHOLDERS' EQUITY

Homebuilding:
Accounts payable $ 127,658 $ 108,064
Accrued expenses and other liabilities 114,781 111,535
Obligations under incentive plans 72,241 62,252
Customer deposits 81,924 63,486
Notes payable - 210
Other term debt 5,259 4,957
Senior notes 115,000 115,000
------------ -----------
516,863 465,504
------------ -----------
Mortgage Banking:
Accounts payable and other liabilities 10,355 9,760
Notes payable 118,711 53,488
------------ -----------
129,066 63,248
------------ -----------


Total liabilities 645,929 528,752
------------ -----------


Forward purchase contract obligation - 65,028

Commitments and contingencies

Shareholders' equity:
Common stock, $0.01 par value; 60,000,000
shares authorized;
20,614,365 shares issued
for 2001 and 2000, respectively 206 206
Additional paid-in-capital 193,757 115,136
Deferred compensation trust- 393,955
and 337,703 shares of NVR, Inc.
common stock for 2001
and 2000, respectively (24,201) (15,915)
Deferred compensation liability 24,201 15,915
Retained earnings 636,604 399,810
Less treasury stock at cost - 13,139,332
and 11,755,671 shares for
2001 and 2000, respectively (481,449) (267,672)
------------ -----------
Total shareholders' equity 349,118 247,480
------------ ----------
Total liabilities and shareholders'
equity $ 995,047 $ 841,260
============ ===========





See notes to consolidated financial statements.

25



NVR, Inc.
Consolidated Statements of Income
(dollars in thousands, except per share data)




Year Ended Year Ended Year Ended
December 31, 2001 December 31, 2000 December 31, 1999
----------------- ----------------- -----------------

Homebuilding:

Revenues $ 2,559,744 $ 2,267,810 $ 1,942,660
Other income 3,513 3,578 1,712
Cost of sales (2,002,290) (1,834,059) (1,610,727)
Selling, general and administrative (178,075) (153,208) (140,762)
Amortization of reorganization value
in excess of amounts allocable to
identifiable assets/goodwill (7,254) (7,254) (7,254)
----------- ----------- -----------
Operating income 375,638 276,867 185,629
Interest expense (11,858) (12,614) (13,533)
----------- ----------- -----------
Homebuilding income 363,780 264,253 172,096
----------- ----------- -----------

Mortgage Banking:

Mortgage banking fees 52,591 37,944 48,165
Interest income 7,025 6,541 13,556
Other income 879 534 598
General and administrative (26,801) (32,424) (40,063)
Amortization of reorganization value
in excess of amounts allocable to
identifiable assets/goodwill (1,088) (1,252) (1,636)
Interest expense (1,728) (3,016) (7,504)
Restructuring and asset
impairment charge -- (5,726) --
----------- ----------- -----------
Operating income 30,878 2,601 13,116
----------- ----------- -----------

Total segment income 394,658 266,854 185,212

Income tax expense (157,864) (108,608) (76,331)
----------- ----------- -----------

Net income $ 236,794 $ 158,246 $ 108,881
=========== =========== ===========

Basic earnings per share $ 29.87 $ 17.42 $ 10.69
=========== =========== ===========

Diluted earnings per share $ 24.86 $ 14.98 $ 9.01
=========== =========== ===========


See notes to consolidated financial statements.

26



NVR, Inc.
Consolidated Statements of Shareholders' Equity
(dollars in thousands)



Additional Deferred Deferred
Common Paid-in Retained Treasury Compensation Compensation
Stock Capital Earnings Stock Trust Liabilitiy Total
----------- ------------- ------------- -------------- -------------- -------------- -----

Balance, December 31, 1998 $ 202 $ 174,173 $ 132,683 $ (141,339) $ - $ - 165,719

Net income - - 108,881 - - - 108,881
Purchase of common stock
for treasury - - - (101,765) - - (101,765)
Performance share activity - 13,412 - 5,322 - - 18,734
Tax benefit from stock
options exercised - 7,542 - - - - 7,542
Option activity 4 1,525 - - - - 1,529
----------- ------------- ------------- -------------- -------------- -------------- ----------
Balance, December 31, 1999 206 196,652 241,564 (237,782) - - 200,640

Net income - - 158,246 - - - 158,246
Deferred compensation
activity - (14,918) - 14,451 (15,915) 15,915 (467)
Purchase of common stock
for treasury - - - (53,677) - - (53,677)
Performance share activity - (3,595) - 3,674 - - 79
Tax benefit from stock
options exercised - 4,628 - - - - 4,628
Option activity - 3,059 - - - - 3,059
Treasury stock issued
upon option exercise - (5,662) - 5,662 - - -
Forward purchase contract
obligation - (65,028) - - - - (65,028)
----------- ------------- ------------- -------------- -------------- -------------- ----------
Balance, December 31, 2000 206 115,136 399,810 (267,672) (15,915) 15,915 247,480

Net income - - 236,794 - - - 236,794
Deferred compensation
activity - - - - (8,286) 8,286 -
Purchase of common stock
for treasury - - - (223,839) - - (223,839)
Performance share activity - 79 - - - - 79
Tax benefit from stock
options exercised - 17,363 - - - - 17,363
Option activity - 6,213 - - - - 6,213
Treasury stock issued
upon option exercise - (10,062) - 10,062 - - -
Forward purchase contract
obligation - 65,028 - - - - 65,028
----------- ------------- ------------- -------------- -------------- -------------- ----------
Balance, December 31, 2001 $ 206 $ 193,757 $ 636,604 $ (481,449) $ (24,201) $ 24,201 $ 349,118
=========== ============= ============= ============== ============== ============== ==========


See notes to consolidated financial statements

27



NVR, Inc.
Consolidated Statements of Cash Flows
(dollars in thousands)



Year Ended Year Ended Year Ended
December 31, 2001 December 31, 2000 December 31, 1999
----------------- ----------------- -----------------

Cash flows from operating activities:
Net income $ 236,794 $ 158,246 $ 108,881
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 15,162 13,840 14,727
Restructuring and asset impairment charge -- 5,726 --
Gain on sales of loans (37,663) (25,512) (33,807)
Deferred tax benefit (6,277) (6,983) (11,911)
Mortgage loans closed (1,885,395) (1,749,720) (2,911,865)
Proceeds from sales of mortgage loans 1,884,320 1,776,595 3,027,057
Gain on sales of mortgage servicing rights (642) (756) (2,962)
Net change in assets and liabilities, net of acquisitions:
Increase in inventories (67,694) (11,226) (34,817)
Increase in contract land deposits (59,533) (33,335) (22,085)
Decrease (increase) in receivables 1,584 (2,638) (2,517)
Increase in accounts payable and
accrued expenses 66,337 46,764 43,444
Increase in obligations under incentive plans 9,989 24,731 14,006
Other, net (6,665) (2,026) 27,202
----------- ----------- -----------

Net cash provided by operating activities 150,317 193,706 215,353
----------- ----------- -----------

Cash flows from investing activities:

Proceeds from sales of mortgage-backed securities 4,102 -- --
Business acquisition, net of cash acquired -- -- (3,697)
Purchase of property, plant and equipment (6,694) (5,027) (9,070)
Principal payments on mortgage-backed securities 530 826 1,765
Proceeds from sales of mortgage servicing rights 16,677 15,762 31,647
Other, net 1,261 572 5,450
----------- ----------- -----------

Net cash provided by investing activities 15,876 12,133 26,095
----------- ----------- -----------

Cash flows from financing activities:

Redemption of mortgage-backed bonds (4,693) (817) (2,300)
Extinguishment of 8% senior notes -- (30,000) --
Purchases of treasury stock (223,839) (53,677) (101,765)
Purchase of NVR common stock for deferred comp plan (8,286) (1,606) --
Net borrowings (repayments) under notes payable
and credit lines 65,315 (74,217) (118,290)
Exercise of stock options 6,213 3,060 1,529
----------- ----------- -----------
Net cash used by financing activities (165,290) (157,257) (220,826)
----------- ----------- -----------

Net increase in cash 903 48,582 20,622
Cash, beginning of year 137,708 89,126 68,504
----------- ----------- -----------

Cash, end of year $ 138,611 $ 137,708 $ 89,126
=========== =========== ===========

Supplemental disclosures of cash flow information:

Interest paid during the year $ 12,588 $ 15,858 $ 21,115
=========== =========== ===========
Income taxes paid during the year, net of refunds $ 144,354 $ 102,694 $ 78,493
=========== =========== ===========


See notes to consolidated financial statements.

28



NVR, Inc.
Notes to Consolidated Financial Statements
(dollars in thousands, except per share data)

1. Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include the
accounts of NVR, Inc. ("NVR" or the "Company"), its wholly owned
subsidiaries and certain partially owned entities. All significant
intercompany transactions have been eliminated in consolidation.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America, requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents include short-term investments with
original maturities of three months or less.

Homebuilding Inventory

Inventory is stated at the lower of cost or market value. Cost
of lots and completed and uncompleted housing units represent the
accumulated actual cost thereof. Field construction supervisors'
salaries and related direct overhead expenses are included in inventory
costs. Interest costs are not capitalized into inventory. Upon
settlement, the cost of the units is expensed on a specific
identification basis. Cost of manufacturing materials is determined on
a first-in, first-out basis.

Intangible Assets

Reorganization value in excess of amounts allocable to
identifiable assets ("excess reorganization value") was being amortized
on a straight-line basis assuming a 15 year useful life. Accumulated
amortization as of December 31, 2001 and 2000 was $63,775 and $56,526,
respectively. Determination of any impairment losses related to this
intangible asset has been based on consideration of projected
undiscounted cash flows.

The excess of amounts paid for business acquisitions over the
net fair value of the assets acquired and the liabilities assumed has
been amortized using the straight line method ranging from five to ten
years. Accumulated amortization was $4,557 and $3,464 at December 31,
2001 and 2000, respectively. During 2000, as part of the mortgage
banking segment's restructuring plan, NVR wrote off $2,575 of goodwill
remaining from the acquisition in March 1999 of First Republic Mortgage
Corporation ("First Republic") (See note 11). Determination of any
impairment losses related to this intangible asset was based on
consideration of projected undiscounted cash flows.

The Financial Accounting Standards Board has issued Statement
of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other
Intangible Assets." SFAS No. 142 changes the accounting for excess
reorganization value and goodwill from an amortization approach to an
impairment only approach. The Company will implement SFAS No. 142
during the first quarter of 2002 and will discontinue the amortization
of excess reorganization value and goodwill as of December 31, 2001.
Pursuant to the transition guidance in SFAS No. 142, management will be
performing an impairment test as defined in SFAS No. 142 during the
first quarter of 2002.

29



NVR, Inc.
Notes to Consolidated Financial Statements
(dollars in thousands, except per share data)

Management does not expect that NVR will incur an impairment
loss relative to its existing excess reorganization value and goodwill
upon adoption of SFAS No. 142 on January 1, 2002. Thereafter,
measurement of impairment will be performed in accordance with the
requirements of SFAS No. 142.

Mortgage Loans Held for Sale, Derivatives and Hedging Activities

In the normal course of business, NVR's mortgage segment
enters into contractual commitments to extend credit to buyers of
single-family homes with fixed expiration dates. The commitments become
effective when the borrowers "lock-in" a specified interest rate within
time frames established by NVR. All mortgagors are evaluated for credit
worthiness prior to the extension of the commitment. Market risk arises
if interest rates move adversely between the time of the "lock-in" of
rates by the borrower and the sale date of the loan to a broker/dealer.
To mitigate the effect of the interest rate risk inherent in providing
rate lock commitments to borrowers, the Company enters into optional
and mandatory delivery forward sale contracts to sell whole loans and
mortgage-backed securities to broker/dealers. The forward sale
contracts lock in an interest rate and price for the sale of loans
similar to the specific rate lock commitments classified as
derivatives. Both the rate lock commitments to borrowers and the
forward sale contracts to broker/dealers are undesignated derivatives,
and accordingly are marked to market through earnings. From the time
NVR funds the rate lock commitments until the loans are delivered into
the forward sales contracts, the forward sales contracts are designated
as a fair value hedge of the Company's closed loan inventory. Both the
forward sales contracts and the closed loans are marked to market.
Although minimal, any hedge ineffectiveness is recorded as a component
of mortgage banking fees. NVR does not engage in speculative or trading
derivative activities. At December 31, 2001, there were contractual
commitments to extend credit to borrowers aggregating $162,114, and
open forward delivery sales contracts aggregating $145,269.

Mortgage-Backed Securities and Mortgage-Backed Bonds

The Company's consolidated balance sheets for all periods
presented reflect its ownership interests in mortgage-backed securities
net of the related mortgage-backed bonds as a component of other assets
of the mortgage banking segment, and the consolidated statements of
income for all periods presented reflect earnings from such interests
net of the related interest expense as a component of other income of
the mortgage banking segment.

On October 1, 2001, the Company called all of its outstanding
mortgage-backed bonds and subsequently sold its ownership interest in
the mortgage-backed securities. No material gain or loss was recognized
as a result of the sale of the mortgage-backed securities or bond
redemption. Ryan Mortgage Acceptance Corporation IV, the entity that
issued the bonds and held the mortgage-backed securities, has been
dissolved as of December 31, 2001.

Earnings per Share

The following weighted average shares and share equivalents
are used to calculate basic and diluted EPS for the years ended
December 31, 2001, 2000 and 1999:

30



NVR, Inc.
Notes to Consolidated Financial Statements
(dollars in thousands, except per share data)



Year Ended Year Ended Year Ended
December 31, 2001 December 31, 2000 December 31, 1999
----------------- ----------------- -----------------

Weighted average number of
shares outstanding used to
calculate basic EPS 7,927,315 9,084,041 10,189,878

Dilutive securities:
Stock options and forward
purchase contract obligation 1,598,645 1,480,174 1,898,510
-------------- -------------- -------------

Weighted average number of
shares and share equivalents
outstanding used to calculate
diluted EPS 9,525,960 10,564,215 12,088,388
============== ============== =============



Revenues-Homebuilding Operations

NVR builds light-frame, low-rise residences which generally
are produced on a pre-sold basis for the ultimate customer. Revenues
are recognized at the time units are completed and title passes to the
customer.

Mortgage Banking Fees

Mortgage banking fees include income earned by NVR's mortgage
banking subsidiaries for originating mortgage loans, servicing mortgage
loans held in the servicing portfolio, title fees, gains and losses on
the sale of mortgage loans and mortgage servicing and other activities
incidental to mortgage banking.

Mortgage Servicing Rights

Mortgage servicing rights are recorded by allocating the total
cost of acquired mortgage loans to the mortgage servicing rights and
the loans (without the mortgage servicing rights) based on their
relative fair values.

The amount capitalized on the balance sheet represents
servicing rights that will be sold on a flow basis under existing sales
contracts and are carried at their relative fair value. The permanent
servicing portfolio has a carrying value of zero because the related
loans were originated and sold prior to the Company's adoption of the
SFAS No. 122 on January 1, 1995.

Depreciation

Depreciation is based on the estimated useful lives of the
assets using the straight-line method. Amortization of capital lease
assets is included in depreciation expense. Model home furniture and
fixtures are generally depreciated over a two year period, office
facilities and other equipment are depreciated over a period from three
to ten years, manufacturing facilities are depreciated over a period of
from five to forty years and property under capital lease is
depreciated in a manner consistent with the Company's depreciation
policy for owned assets.

Income Taxes

Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable


31



NVR, Inc.
Notes to Consolidated Financial Statements
(dollars in thousands, except per share data)

income in the years in which those temporary differences are expected
to be recovered or settled. The effect on the deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.

Financial Instruments

Except as otherwise noted here, NVR believes that insignificant
differences exist between the carrying value and the fair value of its
financial instruments. The estimated fair value of NVR's 8% Senior
Notes due 2005 as of December 31, 2001 and 2000 was $116,006 and
$111,550, respectively. The estimated fair values are based on quoted
market prices. The carrying value was $115,000 at December 31, 2001 and
2000.

Stock-Based Compensation

As permitted under SFAS No. 123, NVR has elected to continue to
follow the guidance of Accounting Principles Board Opinion ("APB") No.
25, Accounting for Stock Issued to Employees, and related
interpretations including FASB Interpretation No. 44, Accounting for
Certain Transactions involving Stock Compensation, an interpretation of
APB Opinion No. 25, in accounting for its stock-based employee
compensation arrangements. The pro forma financial information required
by SFAS No. 123 is included in note 9.

Reclassifications

Certain prior year amounts have been reclassified to conform to
the current year presentation.

2. Segment Information, Nature of Operations, and Certain Concentrations

NVR operates in two business segments: homebuilding and mortgage
banking. The homebuilding segment is one of the largest homebuilders in the
United States and in the Washington, D.C. and Baltimore, Maryland metropolitan
areas, where NVR derived approximately 59% of its 2001 homebuilding revenues.
NVR's homebuilding segment primarily constructs and sells single-family detached
homes, townhomes and condominium buildings under three tradenames: Ryan Homes,
NVHomes and Fox Ridge Homes. The Ryan Homes product is built in eighteen
metropolitan areas located in Maryland, Virginia, West Virginia, Pennsylvania,
New York, North Carolina, South Carolina, Ohio, New Jersey, Delaware, and
Tennessee. The Fox Ridge Homes product is built solely in the Nashville,
Tennessee metropolitan area. The Ryan Homes and Fox Ridge Homes products are
moderately priced and marketed primarily towards first-time homeowners and
first-time move-up buyers. The NVHomes product is built in the Washington, D.C.,
Baltimore, MD, Charlotte, NC and Philadelphia, PA metropolitan areas, and is
marketed primarily to move-up and up-scale buyers.

The mortgage banking segment is a regional mortgage banking operation.
NVR's mortgage banking business generates revenues primarily from origination
fees, gains on sales of loans, title fees, and sales of servicing rights. A
substantial portion of the Company's mortgage operations is conducted in the
Washington, D.C and Baltimore, MD metropolitan areas. Based on NVR's business
restructuring, substantially all of the mortgage banking segment's ongoing loan
closing activity will be for NVR's homebuilding customers (See note 11).

Corporate general and administrative expenses are fully allocated to
the homebuilding and mortgage banking segments in the information presented
below.

32



NVR, Inc.
Notes to Consolidated Financial Statements
(dollars in thousands, except per share data)


For the Year Ended December 31, 2001
- ------------------------------------




Homebuilding Mortgage Banking Totals
------------ ---------------- ------

Revenues $ 2,559,744 $ 52,591 $ 2,612,335 (a)
Interest income 1,145 7,025 8,170 (a)
Interest expense 11,858 1,728 13,586 (a)
Depreciation and amortization 6,020 800 6,820 (b)
Segment profit 371,034 31,966 403,000 (b)
Segment assets 789,906 149,835 939,741 (b)
Expenditures for segment assets 6,595 99 6,694 (a)


(a) Total amounts for the reportable segments equal the respective amounts for
the consolidated enterprise.
(b) The following reconciles segment profit and segment assets to the
respective amounts for the consolidated enterprise:



Homebuilding Mortgage Banking Totals
------------ ---------------- ------

Segment depreciation and
amortization $ 6,020 $ 800 $ 6,820
Add: amortization of excess
reorganization value and goodwill 7,254 1,088 8,342
-------------- -------------- -------------
Consolidated depreciation and
amortization $ 13,274 $ 1,888 $ 15,162
============== ============== =============





Homebuilding Mortgage Banking Totals
------------ ---------------- ------

Segment profit $ 371,034 $ 31,966 $ 403,000
Less: amortization of excess
reorganization value and goodwill (7,254) (1,088) (8,342)
-------------- -------------- -------------
Consolidated income before income
taxes $ 363,780 $ 30,878 $ 394,658
============== ============== =============

Segment assets $ 789,906 $ 149,835 $ 939,741
Add: Excess reorganization value
and goodwill 47,959 7,347 55,306
-------------- -------------- -------------
Total consolidated assets $ 837,865 $ 157,182 $ 995,047
============== ============== =============



For the Year Ended December 31, 2000
- ------------------------------------




Homebuilding Mortgage Banking Totals
------------ ---------------- ------

Revenues $ 2,267,810 $ 37,944 $ 2,305,754 (c)
Interest income 2,233 6,541 8,774 (c)
Interest expense 12,614 3,016 15,630 (c)
Depreciation and amortization 4,693 641 5,334 (d)
Segment profit 271,507 3,853 275,360 (d)
Segment assets 642,273 135,339 777,612 (d)
Expenditures for segment assets 4,824 203 5,027 (c)



(c) Total amounts for the reportable segments equal the respective amounts for
the consolidated enterprise.
(d) The following reconciles segment profit and segment assets to the
respective amounts for the consolidated enterprise:

33



NVR, Inc.
Notes to Consolidated Financial Statements
(dollars in thousands, except per share data)



Homebuilding Mortgage Banking Totals
------------ ---------------- ------

Segment depreciation and
amortization $ 4,693 $ 641 $ 5,334
Add: amortization of excess
reorganization value and goodwill 7,254 1,252 8,506
-------------- -------------- -------------
Consolidated depreciation and
amortization $ 11,947 $ 1,893 $ 13,840
============== ============== =============

Segment profit $ 271,507 $ 3,853 $ 275,360
Less: amortization of excess
reorganization value and goodwill (7,254) (1,252) (8,506)
-------------- -------------- -------------
Consolidated income before income
taxes $ 264,253 $ 2,601 $ 266,854
============== ============== =============

Segment assets $ 642,273 $ 135,339 $ 777,612
Add: Excess reorganization value
and goodwill 55,213 8,435 63,648
-------------- -------------- -------------
Total consolidated assets $ 697,486 $ 143,774 $ 841,260
============== ============== =============



For the Year Ended December 31, 1999
- ------------------------------------



Homebuilding Mortgage Banking Totals
------------ ---------------- ------

Revenues $ 1,942,660 $ 48,165 $ 1,990,825 (e)
Interest income 141 13,556 13,697 (e)
Interest expense 13,533 7,504 21,037 (e)
Depreciation and amortization 3,775 2,062 5,837 (f)
Segment profit 179,350 14,752 194,102 (f)
Segment assets 529,268 163,284 692,552 (f)
Expenditures for segment assets 6,465 2,605 9,070 (e)


(e) Total amounts for the reportable segments equal the respective amounts for
the consolidated enterprise.
(f) The following reconciles segment profit and segment assets to the respective
amounts for the consolidated enterprise:



Homebuilding Mortgage Banking Totals
------------ ---------------- ------

Segment depreciation and
amortization $ 3,775 $ 2,062 $ 5,837
Add: amortization of excess
reorganization value and goodwill 7,254 1,636 8,890
-------------- --------------- -------------
Consolidated depreciation and
amortization $ 11,029 $ 3,698 $ 14,727
============== =============== =============

Segment profit $ 179,350 $ 14,752 $ 194,102
Less: amortization of excess
reorganization value and goodwill (7,254) (1,636) (8,890)
-------------- --------------- -------------
Consolidated income before income
taxes and extraordinary loss $ 172,096 $ 13,116 $ 185,212
============== =============== =============

Segment assets $ 529,268 $ 163,284 $ 692,552
Add: Excess reorganization value
and goodwill 62,467 12,262 74,729
-------------- --------------- -------------
Total consolidated assets $ 591,735 $ 175,546 $ 767,281
============== =============== =============


34



NVR, Inc.
Notes to Consolidated Financial Statements
(dollars in thousands, except per share data)

3. Related Party Transactions

During 2001, 2000, and 1999, NVR purchased, at market prices, developed
lots from a company that is controlled by a member of the board of directors.
Those purchases totaled approximately $19,000 , $25,000 and $19,000 during 2001,
2000 and 1999, respectively. NVR expects to purchase the majority of the
remaining lots under contract as of December 31, 2001 over the next 18 to 24
months for an aggregate purchase price of approximately $26,000.

During the years ended December 31, 2001, 2000 and 1999, NVR's corporate
secretary and general counsel was a partner in a law firm that invoiced NVR
approximately $720, $560 and $471, respectively, in fees and expenses for legal
services.

4. Loan Servicing Portfolio

At December 31, 2001 and 2000, NVR was servicing approximately 2,200 and
3,000 mortgage loans for various investors with aggregate balances of
approximately $223,000 and $275,000, respectively.

At December 31, 2001, NVR had net capitalized mortgage servicing rights of
$1,328 which related to approximately $139,000 of the aggregate $223,000 in
loans serviced. The mortgage servicing rights associated with the remaining
$84,000 in loans serviced are not subject to capitalization because the loans
were originated and sold prior to NVR's adoption of SFAS No. 122 on January 1,
1995.

NVR's permanent servicing portfolio has been fully amortized, and has a
carrying value of zero. The amount capitalized on the balance sheet represents
servicing rights that will be sold on a flow basis under existing sales
contracts and are carried at their relative fair value.

5. Property, Plant and Equipment, net



December 31,
----------------------------------
2001 2000
------------ ------------

Homebuilding:

Office facilities and other $ 7,043 $ 6,496
Model home furniture and fixtures 11,680 9,776
Manufacturing facilities 9,860 9,196
Property under capital leases 7,631 6,374
------------ ------------
36,214 31,842
Less: accumulated depreciation (20,817) (18,328)
------------ ------------
$ 15,397 $ 13,514
============ ============

Mortgage Banking:

Office facilities and other $ 2,327 $ 5,372
Less: accumulated depreciation (1,546) (3,021)
------------ ------------
$ 781 $ 2,351
============ ============


Certain property, plant and equipment listed above are collateral for
various debt of NVR and certain of its subsidiaries as more fully described in
note 6.

35



NVR, Inc.
Notes to Consolidated Financial Statements
(dollars in thousands, except per share data)

6. Debt



December 31,
-------------------------------------
2001 2000
--------------- -------------

Homebuilding:
Notes payable:
Working capital revolving credit (a) $ - $ -
Other - 210
--------------- -------------
$ - $ 210
=============== =============
Other term debt:
Capital lease obligations due
in monthly installments through 2016 (b) $ 5,259 $ 4,957
=============== =============
Senior notes (c) $ 115,000 $ 115,000
=============== =============
Mortgage Banking:
Mortgage warehouse revolving credit (d) $ 115,057 $ 53,190
Mortgage repurchase facility (e) 3,464 -
Capital lease and financing
obligations due in monthly
installments through 2004 (b) 190 298
--------------- -------------
$ 118,711 $ 53,488
=============== =============


(a) The Company, as borrower, has available an unsecured working capital
revolving credit facility (the "Facility") that currently provides for unsecured
borrowings up to $85,000, subject to certain borrowing base limitations. The
Facility is generally available to fund working capital needs of NVR's
homebuilding segment. Up to approximately $40,000 of the Facility is currently
available for issuance in the form of letters of credit, of which $17,798 and
$15,779 were issued at December 31, 2001 and 2000, respectively. The Facility
expires May 31, 2004 and outstanding amounts bear interest at the election of
the Company, at (i) the base rate of interest announced by the Facility agent or
(ii) 1.35% above the Eurodollar Rate. The weighted average interest rates for
the amounts outstanding under the Facility were 4.2% and 8.0% for 2001 and 2000,
respectively. At December 31, 2001, there were no borrowing base limitations
reducing the amount available to the Company for borrowings.

The Facility contains numerous operating and financial covenants, including
required levels of net worth, fixed charge coverage ratios, and several other
covenants related to the construction operations of NVR. In addition, the
Facility contains restrictions on the ability of NVR to, among other things,
incur debt and make investments. Also, the Facility prohibits NVR from paying
dividends to shareholders.

(b) The capital lease obligations have fixed interest rates ranging from 3.0%
to 13.0% and are collateralized by land, buildings and equipment with a net book
value of approximately $5,346 and $5,900 at December 31, 2001 and 2000,
respectively.

The following schedule provides future minimum lease payments under all
financing and capital leases together with the present value as of December 31,
2001:

Years ending December 31,
----------------------------------------------
2002 $ 1,062
2003 1,010
2004 925
2005 841
2006 669
Thereafter 5,472
-----------
9,979
Amount representing interest (4,530)
-----------
$ 5,449
===========

(c) On January 20, 1998, the Company filed a shelf registration statement with
the Securities and

36



NVR, Inc.
Notes to Consolidated Financial Statements
(dollars in thousands, except per share data)

Exchange Commission for the issuance of up to $400,000 of the Company's debt
securities. The shelf registration statement was declared effective on February
27, 1998 and provides that securities may be offered from time to time in one or
more series, and in the form of senior or subordinated debt.

On April 14, 1998, the Company completed an offering under the shelf
registration statement for $145,000 of senior notes due 2005 (the "Senior
Notes"), resulting in aggregate net proceeds to the Company of approximately
$142,800 after fees and expenses. The Senior Notes mature on June 1, 2005 and
bear interest at 8%, payable semi-annually on June 1 and December 1 of each
year, commencing June 1, 1998. The Senior Notes are senior unsecured obligations
of the Company, ranking equally in right of payment with the Company's other
existing and future unsecured indebtedness. The Senior Notes are redeemable at
the option of the Company, in whole or in part, at any time on or after June 1,
2003 at redemption prices ranging from 104% of par in 2003 to par beginning in
2005.

The indenture governing the Senior Notes has, among other items,
limitations on asset sales by NVR and requires that NVR, on a consolidated
basis, maintain a net worth of at least $80,000. In addition, the indenture
limits dividends, certain investments and NVR's ability to incur additional debt
if NVR is in default under the indenture or if NVR does not meet certain fixed
charge coverage ratios.

On February 27, 2001, NVR successfully completed a solicitation of consents
from holders of its Senior Notes to amend the Indenture governing the Senior
Notes. The amendment to the Indenture provides for NVR to repurchase up to an
aggregate $85,000 of its Capital Stock in one or more open market and/or
privately negotiated transactions through March 31, 2002. As of December 31,
2001, NVR had fully utilized the $85,000 for its intended purpose. In March
2001, NVR paid to each holder of the Notes who provided consent, an amount equal
to 4.5% of the principal amount of such holder's Notes.

During 2000, NVR purchased, in the open market, an aggregate of $30,000 in
principal amount of Senior Notes. The Senior Notes were purchased at par, with
no material gain or loss resulting from the transaction. There is an aggregate
of $115,000 of Senior Notes outstanding at December 31, 2001.

(d) The mortgage warehouse facility ("Mortgage Warehouse Revolving Credit") of
NVR Finance had a borrowing limit at December 31, 2001 of $175,000. The
borrowing limit was reduced to $125,000 on January 1, 2002. The interest rate
under the Mortgage Warehouse Revolving Credit agreement is either: (i) the
London Interbank Offering Rate ("Libor") plus 1.25%, or (ii) 1.25% to the extent
that NVR Finance provides compensating balances. The weighted average interest
rates for amounts outstanding under the Mortgage Warehouse Revolving Credit
facility were 2.3% and 3.3% during 2001 and 2000, respectively. Primarily
mortgage loans and gestation mortgage-backed securities collateralize the
Mortgage Warehouse Revolving Credit borrowings. The Mortgage Warehouse Revolving
Credit facility is an annually renewable facility and currently expires August
30, 2002.

The Mortgage Warehouse Revolving Credit agreement includes, among other
items, restrictions on NVR Finance incurring additional borrowings and making
intercompany dividends and tax payments. In addition, NVR Finance is required to
maintain a minimum net worth of $10,000.

(e) NVR Finance from time to time enters into various gestation and repurchase
agreements. NVR Finance currently has available an aggregate of $75,000 of
borrowing capacity in such uncommitted facilities. Amounts outstanding
thereunder accrue interest at various rates tied to the Libor rate and are
collateralized by gestation mortgage-backed securities and whole loans. The
uncommitted facilities generally require NVR Finance to, among other items,
maintain a minimum net worth and limit its level of liabilities in relation to
its net worth. The weighted average interest rates for amounts outstanding under
these uncommitted facilities were 4.3% and 6.7% during 2001 and 2000,
respectively. The average amount outstanding under these uncommitted facilities
was $14,297 and $33,117 during 2001 and 2000 respectively.

* * * * *

37



NVR, Inc.
Notes to Consolidated Financial Statements
(dollars in thousands, except per share data)

Maturities with respect to all notes payable, revolving and repurchase
credit facilities, other term debt, and the Senior Notes as of December 31, 2001
are as follows:

Years ending December 31,
--------------------------------------
2002 $ 119,006
2003 471
2004 421
2005 115,378
2006 235
Thereafter 3,459

The $119,006 maturing in 2002 includes $115,057 of borrowings under the
Mortgage Warehouse Revolving Credit facility that were repaid in January 2002.
The $115,378 maturing during 2005 includes $115,000 of Senior Notes which mature
in June 2005.

At December 31, 2001, the homebuilding and mortgage banking segments had
restricted cash of $2,692 and $2,510, respectively, which includes certain
customer deposits, mortgagor tax, insurance, completion escrows and other
amounts collected at closing which relates to mortgage loans held for sale and
to home sales.

7. Common Stock and Forward Purchase Contract Obligation

There were 7,475,033 and 8,858,694 common shares outstanding at December
31, 2001 and 2000, respectively. As of December 31, 2001, NVR had reacquired a
total of 15,297,097 shares of NVR common shares at an aggregate cost of $530,320
since December 31, 1993. There have been 2,157,765 common shares reissued from
the treasury in satisfaction of employee benefit obligations and stock option
exercises. Beginning in 1999, the Company issues shares from the treasury for
all stock option exercises. During 2001, 344,055 such shares were issued.

On October 3, 2000, NVR reached agreement with a shareholder to purchase
approximately 780,000 shares of its common stock effective January 2, 2001 for
an aggregate purchase price of approximately $65,000. The shareholder is not
affiliated with NVR or its subsidiaries. At December 31, 2000, the forward
purchase contract obligation is presented separately outside of equity in the
accompanying balance sheet as temporary equity. On January 2, 2001, NVR settled
the transaction with the shareholder by taking physical delivery of the shares
for the agreed upon purchase price paid in cash. Of the approximately 780,000
shares settled, approximately 86,000 shares were used for the Company's employer
contribution to the Employee Stock Ownership Plan for plan year 2000 and
approximately 30,000 shares were used for the Deferred Compensation Plan (see
note 9). The remaining shares were retained in treasury.

38



NVR, Inc.
Notes to Consolidated Financial Statements
(dollars in thousands, except per share data)

8. Income Taxes

The provision for income taxes consists of the following:



Year Ended Year Ended Year Ended
December 31, 2001 December 31, 2000 December 31, 1999
----------------- ----------------- -----------------

Current:

Federal $ 139,501 $ 101,267 $ 72,664
State 24,640 14,324 15,578
Deferred:

Federal (5,209) (6,560) (8,374)
State (1,068) (423) (3,537)
------------ ----------- ------------
$ 157,864 $ 108,608 $ 76,331
============ =========== ============



In addition to amounts applicable to income before taxes, the following
income tax benefits were recorded in shareholders' equity:



Year Ended Year Ended Year Ended
December 31, 2001 December 31, 2000 December 31, 1999
------------------ ----------------- -----------------

Income tax benefits arising from
compensation expense for tax
purposes in excess of amounts
recognized for financial
statement purposes $ 17,363 $ 4,628 $ 7,542
============ ============ ============



Deferred income taxes on NVR's consolidated balance sheets are comprised of
the following:



December 31,
----------------------------------------
2001 2000
-------------- -------------

Deferred tax assets:
Other accrued expenses $ 24,053 $ 21,945
Deferred compensation 21,031 17,290
Uniform capitalization 4,672 3,893
Other 5,228 7,075
-------------- -------------
Total deferred tax assets 54,984 50,203
Less: deferred tax liabilities 2,860 5,302
-------------- -------------
$ 52,124 $ 44,901
============== =============


Deferred tax assets arise principally as a result of various accruals
required for financial reporting purposes and deferred compensation, which are
not currently deductible for tax return purposes.

Management believes the Company will have sufficient available carry-backs
and future taxable income to make it more likely than not that the net deferred
tax asset will be realized. Taxable income was approximately $360,857 and
$282,523 for the years ended December 31, 2001 and 2000.

A reconciliation of income tax expense in the accompanying statements of
income to the amount computed by applying the statutory Federal income tax rate
to income of 35% before income taxes and extraordinary losses is as follows:

39



NVR, Inc.
Notes to Consolidated Financial Statements
(dollars in thousands, except per share data)



Year Ended Year Ended Year Ended
December 31, 2001 December 31, 2000 December 31, 1999
----------------- ----------------- -----------------

Income taxes computed at the
Federal statutory rate $ 138,131 $ 93,399 $ 64,824
State income taxes, net of Federal
income tax benefit 15,322 9,036 7,827
Non-deductible amortization 2,537 2,345 2,729
Other, net 1,874 3,828 951
-------------- -------------- -------------
$ 157,864 $ 108,608 $ 76,331
============== ============== =============



In January 2002, NVR amended one of its long-term cash incentive plans,
requiring executive officers to defer receipt of payments due under the plan
until separation of service with NVR. The effect of this amendment, estimated to
produce approximately an $8,000 deferred tax benefit for compensation expensed
prior to December 31, 2001, will reduce NVR's 2002 effective tax rate below
current levels as a result of converting these compensation-related permanent
tax differences to temporary differences as of the amendment date.

9. Profit Sharing and Incentive Plans

Profit Sharing Plans--NVR has a trustee-administered, profit sharing
retirement plan (the "Profit Sharing Plan") and an Employee Stock Ownership Plan
("ESOP") covering substantially all employees. The Profit Sharing Plan and the
ESOP provide for annual discretionary contributions in amounts as determined by
the NVR Board of Directors (the "Board"). The combined plan expense for the
years ended December 31, 2001, 2000 and 1999 was $8,250, $8,320 and $7,712,
respectively. During 2001 and 2000, the ESOP purchased in the open market 53,930
shares and 11,000 shares, respectively, of NVR common stock using cash
contributions provided by NVR. As of December 31, 2001, all shares held by the
ESOP have been committed to be released to participant accounts.

High Performance Compensation Plans--The Company has established the High
Performance Compensation Plan (the "HP Plan") to reward executive officers and
other key personnel for superior performance and to encourage retention of key
personnel. Performance is measured under the HP Plan based upon the Company's
earnings per share growth over a three-year period as compared to an established
threshold. Any compensation benefits earned by Participants under the HP Plan
vest in one-third increments on the last day of each of the three years
immediately succeeding the measurement period based upon continued employment by
the Participant. Compensation expense recognized pursuant to the HP Plan totaled
$14,946, $24,264 and $11,095 at December 31, 2001, 2000 and 1999, respectively.

Management Incentive Plans--Management long-term incentive plans provide
several types of equity incentives to NVR's executives and managers. The equity
incentives take the form of stock options and performance share awards as
described below. Stock options issued under the management long-term incentive
plans are issued with an exercise price equal to the market value of the
underlying shares on the date of grant.

Under the Management Incentive Plan adopted by the Board in 1993,
participants received options to purchase a total of 1,117,949 NVR shares (the
"1993 NVR Share Options"). The 1993 NVR Share Options issued under the
Management Incentive Plan were fully vested as of December 31, 1996, and
generally expire 10 years after the dates upon which they were granted.

Under the 1994 Management Incentive Plan (the "1994 Incentive Plan"),
executive officers and other employees of the Company were eligible to receive
stock options (the "1994 NVR Share Options") and performance shares (the "1994
Performance Shares"). There were 48,195 1994 NVR Share Options and

40



NVR, Inc.
Notes to Consolidated Financial Statements
(dollars in thousands, except per share data)

1,124,929 1994 Performance Shares authorized for grant under the 1994 Incentive
Plan. The 1994 NVR Share Options generally expire 10 years after the dates upon
which they were granted, and were fully vested as of December 31, 1999. All
1,124,929 1994 Performance Shares have been granted to employees under the 1994
Incentive Plan, and all 1994 Performance Shares were vested as of December 31,
1999. Compensation expense of $18,670 was recognized for the 1994 Performance
Shares in 1999.

During 1996, the Company's Shareholders approved the Board of Directors'
adoption of the Management Long-Term Stock Option Plan (the "1996 Option Plan").
There are 2,000,000 non-qualified stock options ("Options") authorized under the
Management Long Term Stock Option Plan. The Options generally expire 10 years
after the dates upon which they were granted, and vest in one-third increments
on each of December 31, 2000, 2001 and 2002, with vesting based upon continued
employment.

During 1999, the Company's Shareholders approved the Board of Directors'
adoption of the 1998 Management Long-Term Stock Option Plan (the "1998 Option
Plan"). There are 1,000,000 non-qualified stock options ("Options") authorized
under the 1998 Option Plan. The Options generally expire 10 years after the
dates upon which they were granted, and vest in one-third increments on each of
December 31, 2003, 2004 and 2005, with vesting based upon continued employment.

During 2000, the Board approved the 2000 Broadly-Based Stock Option Plan
(The "2000 Plan"). There are 2,000,000 non-qualified stock options ("Options")
authorized under the 2000 Plan. Grants under the 2000 Plan will be available to
both employees and members of the Board. The distribution of options to key
employees and members of the board, in aggregate are limited to 50% or less of
the total options authorized under the 2000 Plan. Options granted under the 2000
Plan will generally expire 10 years from the date of grant, and will vest in 25%
increments on each of December 31, 2006, 2007, 2008 and 2009.

41



Stock option activity by option plan for the years presented is as follows:



2001 2000 1999
----------------- ------------------ --------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
1993 NVR Share Options Options Prices Options Prices Options Prices
- ---------------------- ------- ------ ------- ------ ------- ------

Options outstanding at the
beginning of the year 219,096 $ 7.71 359,771 $ 7.60 830,971 $ 7.60
Granted - $ - - $ - - $ -
Canceled - $ - - $ - - $ -
Exercised (74,693) $ 7.66 (140,675) $ 8.01 (471,200) $ 7.62
---------- ---------- ----------
Outstanding at end of year 144,403 $ 7.73 219,096 $ 7.71 359,771 $ 7.60
========== ========== ==========
Exercisable at end of year 144,403 $ 7.73 219,096 $ 7.71 359,771 $ 7.60
========== ========== ==========
1994 NVR Share Options
- ----------------------
Options outstanding at the
beginning of the year 16,396 $ 20.35 35,032 $ 20.86 43,363 $ 19.54
Granted - $ - - $ - - $ -
Canceled - $ - - $ - - $ -
Exercised (6,234) $ 25.08 (18,636) $ 21.30 (8,331) $ 14.00
---------- ---------- ----------
Outstanding at end of year 10,162 $ 17.46 16,396 20.35 35,032 $ 20.86
========== ========== ==========
Exercisable at end of year 10,162 $ 17.46 16,396 $ 20.35 29,569 $ 19.02
========== ========== ==========
1996 Option Plan
- ----------------
Options outstanding at the
beginning of the year 1,847,405 $ 15.83 1,891,905 $ 14.70 1,753,405 $ 11.42
Granted 106,000 $ 125.83 85,000 $ 56.84 200,500 $ 42.65
Canceled (6,333) $ 15.69 (111,067) $ 26.31 (62,000) $ 12.48
Exercised (191,253) $ 23.43 (18,433) $ 25.50 - $ -
---------- ---------- ----------
Outstanding at end of year 1,755,819 $ 21.48 1,847,405 $ 15.83 1,891,905 $ 14.70
========== ========== ==========
Exercisable at end of year 1,040,934 $ 14.63 615,802 $ 15.83 - $ -
========== ========== ==========
1998 Option Plan
- ----------------
Options outstanding at the
beginning of the year 1,000,000 $ 49.57 927,000 $ 47.63 - $ -
Granted 2,500 $ 91.25 104,500 $ 66.18 927,000 $ 47.63
Canceled (4,000) $ 51.28 (31,500) $ 47.63 - $ -
Exercised - $ - - $ - - $ -
---------- ---------- ----------
Outstanding at end of year 998,500 $ 49.66 1,000,000 $ 49.57 927,000 $ 47.63
========== ========== ==========
Exercisable at end of year - $ - - $ - - $ -
========== ========== ==========

2000 Option Plan
- ----------------
Options outstanding at the
beginning of the year - $ - - $ - - $ -
Granted 1,823,100 $ 188.86 - $ - - $ -
Canceled - $ - - $ - - $ -
Exercised - $ - - $ - - $ -
---------- ---------- ----------
Outstanding at end of year 1,823,100 $ 188.86 - $ - - $ -
========== ========== ==========
Exercisable at end of year - $ - - $ - - $ -
========== ========== ==========


42



NVR, Inc.
Notes to Consolidated Financial Statements
(dollars in thousands, except per share data)



Weighted
Weighted Average
Average Remaining
Exercise Contractual
Range of Exercise Prices Number Price Life in Years
- ------------------------ ------ -------- -------------

1993 NVR Share Options
- ----------------------
Outstanding at December 31, 2001:
$ 5.06 - $ 6.41 3,400 $ 5.95 3.4
$ 7.62 - $ 9.11 141,003 $ 7.78 1.9
Exercisable at December 31, 2001
$ 5.06 - $ 6.41 3,400 $ 5.95
$ 7.62 - $ 9.11 141,003 $ 7.78
1994 NVR Share Options
- ----------------------
Outstanding at December 31, 2001:
$ 14.00 - $ 25.00 10,162 $ 17.46 5.7
Exercisable at December 31, 2001:
$ 14.00 - $ 25.00 10,162 $ 17.46
1996 Option Plan
- ----------------
Outstanding at December 31, 2001:
$ 9.13 - $ 10.63 1,377,404 $ 10.60 4.4
$ 14.00 - $ 21.00 101,511 $ 18.03 5.8
$ 22.63 - $ 25.00 10,740 $ 23.82 6.0
$ 38.00 - $ 52.75 132,804 $ 44.28 7.6
$ 62.13 - $ 81.75 32,360 $ 72.24 8.7
$ 92.15 - $105.46 51,500 $105.07 8.7
$146.00 - $180.00 49,500 $155.32 9.4
Exercisable at December 31, 2001:
$ 9.13 - $ 10.63 887,403 $ 10.61
$ 14.00 - $ 21.00 56,511 $ 18.19
$ 22.63 - $ 25.00 6,272 $ 23.99
$ 38.00 - $ 52.75 71,471 $ 44.34
$ 62.13 - $ 81.75 18,277 $ 72.21
$146.00 - $180.00 1,000 $146.00
1998 Option Plan *
- ------------------
Outstanding at December 31, 2001:
$ 43.50 - $ 62.13 941,000 $ 47.88 7.4
$ 72.00 - $ 91.25 57,500 $ 78.86 7.4
2000 Option Plan *
- ------------------
Outstanding at December 31, 2001:
$151.00 - $189.00 1,823,100 $188.86 9.3


*None of the options outstanding under this Option Plan are exercisable at
December 31, 2001.

The weighted average per share fair values of grants made in 2001, 2000 and
1999 for management incentive plans were $116.88, $39.76 and $29.41,
respectively. The fair values of the options granted were estimated on the grant
date using the Black-Scholes option-pricing model based on the following
weighted average assumptions:



2001 2000 1999
-------------- ------------- -------------

Estimated option life 10 years 10 years 10 years
Risk free interest rate 5.47% 6.12% 5.94%
Expected volatility 42.38% 40.77% 40.19%
Expected dividend yield 0.00% 0.00% 0.00%


43



NVR, Inc.
Notes to Consolidated Financial Statements
(dollars in thousands, except per share data)

Director Incentive Plans--The NVR Directors' Long Term Incentive Plan
("1993 Directors' Plan") provides for each eligible director to be granted
options to purchase 22,750 shares of common stock with a maximum number of
shares issuable under the plan of 364,000. There were 182,000 Directors' Options
granted to eligible directors on September 30, 1993 at a grant price of $16.60
per share, which exceeded the fair value of the underlying shares on the date of
grant. The options became exercisable six months after the date of grant and
expire in September 2003.

There were 192,000 options to purchase shares of common stock authorized
and granted in 1996 to the Company's outside directors under the Directors' Long
Term Stock Option Plan (the "1996 Directors' Plan"). There are no additional
options available for grant under this plan. The option exercise price for the
options granted was $10.25 per share, which was equal to the fair market value
of the Company's Shares on the date of grant. The Options were granted for a
10-year period beginning from the date of grant, and vest in one-third
increments on each of December 31, 1999, 2000, and 2001.

There were 150,000 options to purchase shares of common stock authorized
for grant in 1999 to the Company's outside directors under the 1998 Directors'
Long Term Stock Option Plan (the "1998 Directors' Plan"). A total of 87,500
options were granted at an exercise price of $49.06, which was equal to the fair
market value of the Company's Shares on the date of grant. The Options were
granted for a 10 year period beginning from the date of grant, and vest in
twenty-five percent (25%) increments on each of December 31, 2002, 2003, 2004
and 2005.

The members of Board of Directors also participate in the 2000
Broadly-Based Stock Option Plan. See description on page 41 herein.



2001 2000 1999
----------------- ------------------- -----------------
Exercise Exercise Exercise
1993 Directors' Plan Options Price Options Price Options Price
- -------------------- ------- ----- ------- ----- ------- -----

Options outstanding at the
beginning of the year 45,500 $ 16.60 101,000 $ 16.60 113,750 $ 16.60
Granted - $ - - $ - - $ -
Canceled - $ - - $ - - $ -
Exercised (22,750) $ 16.60 (55,500) $ 16.60 (12,750) $ 16.60
---------- --------- -----------
Outstanding at end of year 22,750 $ 16.60 45,500 $ 16.60 101,000 $ 16.60
========== ========= ===========
Exercisable at end of year 22,750 $ 16.60 45,500 $ 16.60 101,000 $ 16.60
========== ========= ===========
1996 Directors' Plan
- --------------------
Options outstanding at the
beginning of the year 152,000 $ 10.25 168,000 $ 10.25 168,000 $ 10.25
Granted - $ - - $ - - $ -
Canceled - $ - - $ - - $ -
Exercised (46,000) $ 10.25 (16,000) $ 10.25 - $ -
---------- --------- -----------
Outstanding at end of year 106,000 $ 10.25 152,000 $ 10.25 168,000 $ 10.25
========== ========= ===========
Exercisable at end of year 106,000 $ 10.25 96,000 $ 10.25 56,000 $ 10.25
========== ========= ===========
1998 Directors' Plan
- --------------------
Options outstanding at the
beginning of the year 78,125 $ 49.06 87,500 $ 49.06 - $ -
Granted - $ - - $ - 87,500 $ 49.06
Canceled - $ - 9,375 $ 49.06 - $ -
Exercised (3,125) $ 49.06 - $ - - $ -
---------- --------- -----------
Outstanding at end of year 75,000 $ 49.06 78,125 $ 49.06 87,500 $ 49.06
========== ========= ===========
Exercisable at end of year - $ - - $ - - $ -
========== ========= ===========


The weighted average fair value of grants made during 1999 under director
incentive plans was $30.48 per share. The fair value was calculated using the
Black-Scholes option pricing model, under the following assumptions: i) the
estimated option life was equal to ten years, ii) the risk free interest rate
was 5.77%, iii) the expected volatility equaled 40.19%, and iv) the estimated
dividend yield was 0%.

44



NVR, Inc.
Notes to Consolidated Financial Statements
(dollars in thousands, except per share data)

SFAS No. 123 requires companies who continue to apply Opinion 25 to account
for their stock-based employee compensation arrangements to provide pro forma
net income and earnings per share as if the fair value based method had been
used to account for compensation cost. Accordingly, pro forma net income and
earnings per share would have been $215,609 ($22.63 diluted share), $152,503
($14.44 per diluted share) and $104,122 ($8.61 per diluted share) for the years
ended December 31, 2001, 2000 and 1999, respectively, if the Company had
accounted for its stock based employee compensation arrangements using the fair
value method. The 2001, 2000 and 1999 effects of applying SFAS No. 123 for
providing pro forma disclosures are not likely to be representative of the
effects on reported net income and earnings per share for future years because
the number of option grants and the fair value assigned to future grants could
differ.

To minimize the non-deductibility of executive compensation expense due to
the limitations of Section 162(m) of the Internal Revenue Code and still
maintain the ability to competitively compensate the Company's executive
officers, the Company established a deferred compensation plan ("Deferred Comp
Plan"). The specific purpose of the Deferred Comp Plan was to establish a
vehicle whereby the executive officers could defer the receipt of compensation
that otherwise would be nondeductible for tax purposes by the Company into a
period where the Company would realize a tax deduction for the amounts paid. The
Deferred Comp Plan is also available to other members of the Company's
management group. Amounts deferred into the Deferred Comp Plan are invested in
NVR common stock and are paid out in a fixed number of shares upon expiration of
the deferral period.

The Deferred Comp Plan Trust was funded during the first quarter of 2000
with 305,863 NVR shares issued from the Company's treasury stock account. In
addition, the Deferred Comp Plan Trust purchased 34,840 NVR common shares on the
open market at an aggregate cost of $1,606. The compensation deferred was
related to benefits earned by NVR employees under the Company's 1994 Management
Equity Incentive Plan and the 1996 High Performance Plan. During 2000, 3,000
shares were distributed from the Deferred Comp Plan. During 2001, the Deferred
Comp Plan was funded with 29,915 shares of stock obtained from the settlement of
the forward purchase contract in January 2001 and 26,337 shares of stock
purchased on the open market at an aggregate cost of $4,744. The 2001
contributions were related to benefits earned under the 1996 High Performance
Plan and the annual incentive plan. At December 31, 2001 there are 393,955
shares held by the Deferred Comp Plan. Shares held by the Deferred Comp Plan are
treated as outstanding shares in the Company's earnings per share calculation
for the years ended December 31, 2001 and 2000.

10. Commitments and Contingent Liabilities

NVR is committed under several non-cancelable operating leases involving
office space, model homes, manufacturing facilities and equipment. Future
minimum lease payments under these operating leases as of December 31, 2001 are
as follows:

Years ended December 31,
--------------------------------------------
2002 $ 14,491
2003 8,874
2004 6,076
2005 3,706
2006 2,417
Thereafter 10,836
-----------
$ 46,400
===========

Total rent expense incurred under operating leases was approximately
$16,492, $12,000, and $10,800 for the years ended December 31, 2001, 2000 and
1999, respectively.

NVR is not in the land development business. NVR generally seeks to
maintain control over a supply of lots believed to be suitable to meet its sales
objectives for the next 24 to 36 months. NVR

45



NVR, Inc.
Notes to Consolidated Financial Statements
(dollars in thousands, except per share data)

purchases finished lots under option contracts which typically require deposits
which may be forfeited if NVR fails to perform under the contract. The deposits
are in the form of cash or letters of credit in varying amounts and represent a
percent of the aggregate acquisition value of the finished lots. This lot
acquisition strategy reduces the financial requirements and risks associated
with direct land ownership and land development. At December 31, 2001, assuming
that contractual development milestones are met, NVR is committed to placing
additional forfeitable deposits with land developers under existing lot option
contracts of approximately $21,000.

On a very limited basis, NVR also obtains a supply of finished lots using
unconsolidated limited liability land corporations ("LLLC's"). All LLLC's are
structured such that NVR is a non-controlling limited partner and is at risk
only for the amount invested. Accordingly, such investments are accounted for
under the equity method of accounting. NVR is not a borrower, guarantor or
obligor on any of the LLLC's debt. At December 31, 2001, NVR had an aggregate
investment of approximately $3,500 in LLLC's, which controlled approximately
1,000 lots.

At December 31, 2001, NVR was committed to purchase approximately 40
finished lots for an aggregate purchase price of approximately $3,200 under
specific performance contracts.

During the ordinary course of operating the mortgage banking and
homebuilding businesses, NVR is required to enter into bond or letter of credit
arrangements with local municipalities, government agencies, or land developers
to collateralize its obligations under various contracts. NVR had approximately
$26,501 (includes $17,798 for letters of credit as described in note 6(a)
herein) of contingent obligations under such agreements as of December 31, 2001.
NVR believes it will fulfill its obligations under the related contracts and
does not anticipate any losses under these bonds or letters of credit.

NVR and its subsidiaries are also involved in litigation arising from the
normal course of business. In the opinion of management, and based on advice of
legal counsel, this litigation will not have any material adverse effect on the
financial position or results of operations of NVR.

11. Mortgage Banking Segment Restructuring Plan

During the first quarter of 2000, NVR formulated a detailed plan to align
its mortgage banking operations to exclusively serve the Company's homebuilding
customers. The plan specifically entailed the closure of all of the Company's
retail operations, including all of the retail branches acquired from the
acquisition of First Republic acquired in March 1999. This action was consistent
with the Company's decision in December 1999 to exit the wholesale mortgage
origination business. The Company's mortgage banking operation is now solely
focused on serving the Company's homebuilding operations. The restructuring plan
was substantially completed during the second quarter of 2000.

As a result of the restructuring, the Company recorded a restructuring and
asset impairment charge of $5,726 in the first quarter of 2000. A detail of the
costs comprising the total charge incurred in the first quarter is as follows:

Write off of First Republic goodwill $ 2,575
Noncancelable office and equipment leases 1,480
Asset impairments 1,362
Severance 309
-------
Total $ 5,726
=======

During 2001 and 2000, approximately $797 and $863, respectively, in
severance and lease costs was applied against the restructuring reserve.
Approximately $129 of the restructuring accrual established at March 31, 2000,
remains at December 31, 2001, and primarily relates to accrued lease costs.

46



NVR, Inc.
Notes to Consolidated Financial Statements
(dollars in thousands, except per share data)

12. Quarterly Results [unaudited]

The following table sets forth unaudited selected financial data and
operating information on a quarterly basis for the years ended December 31, 2001
and 2000.



Year Ended December 31, 2001
------------------------------------------------------------------
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
------------- ------------- ------------- -------------

Revenues-homebuilding
operations $ 519,249 $ 648,465 $ 677,962 $ 714,068
Gross profit - homebuilding
operations $ 112,084 $ 142,789 $ 147,921 $ 154,660
Mortgage banking fees $ 9,990 $ 12,915 $ 13,922 $ 15,764
Net income $ 47,920 $ 59,362 $ 62,492 $ 67,020
Diluted earnings per share $ 4.84 $ 6.10 $ 6.68 $ 7.41
Contracts for sale, net
of cancellations (units) 2,823 3,342 1,857 2,760
Settlements (units) 2,206 2,629 2,742 2,795
Backlog, end of period (units) 5,765 6,478 5,593 5,558
Loans closed $ 359,475 $ 481,568 $ 503,065 $ 541,287


Year Ended December 31, 2000
------------------------------------------------------------------
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
------------- ------------- ------------- -------------

Revenues-homebuilding
operations $ 490,581 $ 558,506 $ 602,485 $ 616,238
Gross profit - homebuilding
operations $ 90,904 $ 103,524 $ 117,071 $ 122,252
Mortgage banking fees $ 7,963 $ 9,175 $ 10,147 $ 10,659
Net Income $ 30,574 $ 37,204 $ 43,914 $ 46,554
Diluted earnings per share $ 2.90 $ 3.62 $ 4.30 $ 4.51
Contracts for sale, net
of cancellations (units) 2,609 3,010 2,180 2,469
Settlements (units) 2,236 2,469 2,674 2,676
Backlog, end of period (units) 5,308 5,849 5,355 5,148
Loans closed $ 469,598 $ 467,818 $ 401,037 $ 411,267


47